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Does Globalization Promote Financial Integration in South Asian Economies? Unveiling the Role of Monetary and Fiscal Performance in Internationalization

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  • Ali, Amjad
  • Ehsan, Rehan
  • Audi, Marc
  • Hamadeh, Hani Fayad

Abstract

Presently, monitoring and analyzing financial integration has become a key function and requirement of the financial regulatory bodies and central banks of the countries. It has also been observed that financial integration is important to make the financial system streamlined and efficient which is eventually used to make monetary policies and to judge a country’s financial performance. Financial integration also highlights disruption in the financial system of the country if it does not work properly. This study has examined the impact of globalization on financial integration in the case of South Asian countries from 1996 to 2020. The selected South Asian countries are Bangladesh, India, Nepal, Pakistan, and Sri Lanka. Financial integration is selected as the dependent variable, whereas political instability, globalization, fiscal performance, monetary performance, and economic misery are selected as explanatory variables. PP-FC, ADF-FC, IP&S, and LLC unit root tests have been used to check the stationarity of the variables. Panel least squares and fixed-effect model have been used for examining the dependence of financial integration on selected explanatory variables. The outcomes of unit root tests show that there is the same order of integration among the selected variables of the model i.e. first difference. The results show that level of political instability has a negative and insignificant impact on financial integration. The outcome shows that monetary performance, globalization, and economic misery have positive and significant impacts on financial integration. Fiscal performance has a negative and significant impact on financial integration. Based on the results, it suggested that South countries should make stable monetary and fiscal performance with a rise in globalization to raise financial integration. Moreover, political instability and economic misery should be discouraged for higher financial integration.

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  • Ali, Amjad & Ehsan, Rehan & Audi, Marc & Hamadeh, Hani Fayad, 2022. "Does Globalization Promote Financial Integration in South Asian Economies? Unveiling the Role of Monetary and Fiscal Performance in Internationalization," MPRA Paper 115304, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:115304
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    Cited by:

    1. Ali, Amjad, 2022. "Determining Pakistan's Financial Dependency: The Role of Financial Globalization and Corruption," MPRA Paper 116097, University Library of Munich, Germany.
    2. Ali, Amjad, 2022. "Foreign Debt, Financial Stability, Exchange Rate Volatility and Economic Growth in South Asian Countries," MPRA Paper 116328, University Library of Munich, Germany, revised 2022.
    3. Ali, Amjad, 2022. "Financial Liberalization, Institutional Quality and Economic Growth Nexus: Panel Analysis of African Countries," MPRA Paper 116101, University Library of Munich, Germany.

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    Keywords

    globalization; financial integration; political instability; monetary performance; fiscal performance; economic misery;
    All these keywords.

    JEL classification:

    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
    • F50 - International Economics - - International Relations, National Security, and International Political Economy - - - General
    • F60 - International Economics - - Economic Impacts of Globalization - - - General
    • O23 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Fiscal and Monetary Policy in Development

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