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Regional and Global Financial Integration in East Asia

  • Kim, Soyoung
  • Lee, Jong-Wha
  • Shin, Kwanho

We examine the degree of regional vs. global financial integration of East Asian countries in three ways; (1) comparing the size of cross-border assets such as securities and bank claims, (2) estimating the gravity model of bilateral financial asset holdings, and (3) estimating consumption risk sharing model. The results suggest that East Asian financial markets, particularly compared to the European ones, are relatively less integrated with each other than to global markets. We also find relatively more evidence of regional financial integration in bank claim markets than portfolio asset markets. The low financial integration within East Asia is attributed to the low incentives for portfolio diversification within the region, the low degree of development and deregulation of financial markets, and the instability in monetary and exchange rate regime.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 695.

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Date of creation: May 2006
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Handle: RePEc:pra:mprapa:695
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  28. Mario J. Crucini, 1999. "On International and National Dimensions of Risk Sharing," The Review of Economics and Statistics, MIT Press, vol. 81(1), pages 73-84, February.
  29. Kim, Soyoung & Kim, Sunghyun H. & Wang, Yunjong, 2006. "Financial integration and consumption risk sharing in East Asia," Japan and the World Economy, Elsevier, vol. 18(2), pages 143-157, March.
  30. Jong-Wha Lee & Kwanho Shin, 2004. "Exchange Rate Regimes and Economic Linkages," International Finance 0409006, EconWPA.
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