Integration of Financial Markets in SAARC Countries: Evidence Based on Uncovered Interest rate Parity Hypothesis
This paper examines interest rate linkages among four SAARC countries vis-a-vis United State using monthly data over the period 1990M1 to 2006M3. The emperical findings suggest the existance of single cointegrating vector between SAARC countries interest rates and US interest rate. The result further suggest that except India, the coefficient restriction for Pakistan, Sri Lanka and Bangladesh are met segnificantly. However, in the case of India, the coefficient associated with foreign interest rate is far from the predicted value of UIP.The adjustment coefficient indicate no two ways causility. We also impemented the cointegration test within the SAARC countries. The test results suggest the existance of the one cointegrating vector.the existance of one cointegrating vector indicates the low degree of money markets integration in the region. Moreover, in the long run except Indian interest rate, other interest rates exerted positive impact on Pak-interest rate. Short Run Error Correction model is also estimated. the results suggest that Pakistani, Indian and Sri Lankan interest rates act as equlibrating factors in the long run, while no dynamic interaction between Pak-interst rate and Bangladesh-interest rate have been seen so far.
|Date of creation:||2007|
|Date of revision:|
|Publication status:||Published in Kashmir Economic Review 1.16(2007): pp. 1-16|
|Contact details of provider:|| Postal: Ludwigstraße 33, D-80539 Munich, Germany|
Web page: https://mpra.ub.uni-muenchen.de
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Nieh, Chien-Chung & Yau, Hwey-Yun, 2004. "Time series analysis for the interest rates relationships among China, Hong Kong, and Taiwan money markets," Journal of Asian Economics, Elsevier, vol. 15(1), pages 171-188, February.
- Ross Levine, 1997.
"Financial Development and Economic Growth: Views and Agenda,"
Journal of Economic Literature,
American Economic Association, vol. 35(2), pages 688-726, June.
- Levine, Ross, 1996. "Financial development and economic growth : views and agenda," Policy Research Working Paper Series 1678, The World Bank.
- Zoran Hodjera, 1973. "International Short-Term Capital Movements: A Survey of Theory and Empirical Analysis (Les mouvements internationaux de capitaux Ã court terme: Ã©tude de thÃ©orie et d'analyse empirique) (Movimientos ," IMF Staff Papers, Palgrave Macmillan, vol. 20(3), pages 683-740, November.
- Muhammad Arshad Khan & Abdul Qayyum & Saeed Ahmed Sheikh, 2005.
"Financial Development and Economic Growth: The Case of Pakistan,"
The Pakistan Development Review,
Pakistan Institute of Development Economics, vol. 44(4), pages 819-837.
- Khan, Arshad & Qayyum, Abdul & Sheikh, Saeed, 2005. "Financial Development and Economic Growth: The Case of Pakistan," MPRA Paper 2145, University Library of Munich, Germany, revised 2005.
- Townsend, R.M., 1991.
"Risk and Insurance in Village India,"
University of Chicago - Economics Research Center
91-3, Chicago - Economics Research Center.
- Robert M. Townsend, . "Risk and Insurance in Village India," University of Chicago - Population Research Center 91-3a, Chicago - Population Research Center.
- Surbhi Jain & N.R. Bhanumurthy, 2005. "Financial markets integration in India," Asia-Pacific Development Journal, United Nations Economic and Social Commission for Asia and the Pacific (ESCAP), vol. 12(2), pages 15-32, December.
- Bennett T. McCallum, 1992.
"A Reconsideration of the Uncovered Interest Parity Relationship,"
NBER Working Papers
4113, National Bureau of Economic Research, Inc.
- McCallum, Bennett T., 1994. "A reconsideration of the uncovered interest parity relationship," Journal of Monetary Economics, Elsevier, vol. 33(1), pages 105-132, February.
- Imad Moosa & Razzaque Bhatti, 1997. "Are Asian Markets Integrated? Evidence for Six Countries Vis-A-Vis Japan," International Economic Journal, Taylor & Francis Journals, vol. 11(1), pages 51-67.
When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:6751. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Joachim Winter)
If references are entirely missing, you can add them using this form.