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Asian financial integration: Global or regional? Evidence from money and bond markets

Asian financial integration: Global or regional? Evidence from money and bond markets

Rughoo, Aarti and You, Kefei (2015) Asian financial integration: Global or regional? Evidence from money and bond markets. International Review of Financial Analysis, 48. pp. 419-434. ISSN 1057-5219 (doi:10.1016/j.irfa.2015.03.007)

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Abstract

This paper investigates the degree of global versus regional financial integration in Southeast Asia during the period 2004–2012. We examine integration in the money and bond markets in Asia by employing a covered-interest-parity-based measure of financial integration. The impact of the 2008 financial crisis as well as the recent regional bond initiatives on the integration process of Asian money and bond markets respectively are specifically investigated. Empirically, we adopt the Phillips and Sul (2007) convergence methodology that has not been previously employed to examine the integration process in Asian money and bond markets. We find evidence of both global and regional integration in the money market pre 2008 but once the crisis hit, the process of global integration comes to an abrupt halt. However, regional integration, albeit at a slower pace, is still clearly evident in the post-crisis period. As for the Asian bond market, evidence of both global and regional integration is found but, in comparison, the latter is more convergent post 2008. Regional integration is stronger when interest rates with longer maturity are considered. In addition, we identify some convergent subgroups of countries and this suggests that a multi-tiered style of convergence is present.

Item Type: Article
Uncontrolled Keywords: Asia; Financial integration; Bond market; Money market; Panel convergence
Subjects: D History General and Old World > DS Asia
H Social Sciences > HG Finance
Faculty / Department / Research Group: Faculty of Business
Faculty of Business > Department of Accounting & Finance
Last Modified: 08 Dec 2017 11:33
Selected for GREAT 2016: None
Selected for GREAT 2017: GREAT a
Selected for GREAT 2018: None
URI: http://gala.gre.ac.uk/id/eprint/16263

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