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Financial integration in emerging market economies

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  • Pasricha, Gurnain

Abstract

This paper analyzes de-facto integration in some Emerging Market Economies based on behavior of deviations from Covered Interest Parity in the last 10 years. A price-based measure of de-facto integration provides crucial information for answering policy questions related to impact of capital openness and of effectiveness of controls. An Asymmetric Self Exciting Threshold Autoregressive model is used to estimate bands of speculative inaction. The estimated bands follow the pattern expected, and reveal a rational market in the sense that deviations from parity are self correcting. The paper uses information from the estimated models to construct a new index of de-facto integration.

Suggested Citation

  • Pasricha, Gurnain, 2008. "Financial integration in emerging market economies," MPRA Paper 8220, University Library of Munich, Germany, revised 10 Apr 2008.
  • Handle: RePEc:pra:mprapa:8220
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Pasricha, Gurnain Kaur, 2008. "Imperfect Competition in Financial Markets and Capital Controls: A Model and a Test," MPRA Paper 12125, University Library of Munich, Germany.
    2. Gurnain Kaur Pasricha, 2009. "Bank Competition and International Financial Integration: Evidence using a new index," FIW Working Paper series 037, FIW.
    3. Hutchison, Michael & Kendall, Jake & Pasricha, Gurnain & Singh, Nirvikar, 2009. "Indian capital control liberalization: Evidence from NDF markets," Working Papers 09/60, National Institute of Public Finance and Policy.
    4. Ananthakrishnan Prasad & Charles Frederick Kramer & Helene Poirson Ward, 2008. "Challenges to Monetary Policy from Financial Globalization; The Case of India," IMF Working Papers 08/131, International Monetary Fund.
    5. Michael M Hutchison & Gurnain Kaur Pasricha & Nirvikar Singh, 2012. "Effectiveness of Capital Controls in India: Evidence from the Offshore NDF Market," IMF Economic Review, Palgrave Macmillan;International Monetary Fund, vol. 60(3), pages 395-438, September.
    6. Olesia Kozlova, 2013. "Forward-Rate Bias, Imperfect Knowledge, and Risk: Evidence from Developed and Developing Countries," 2013 Papers pko627, Job Market Papers.

    More about this item

    Keywords

    Covered Interest Parity; Threshold Autoregression; Financial Integration; Integration Index; Emerging Markets;

    JEL classification:

    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration

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