Integration or Segmentation of Malaysian Equity Market: An Analysis of Pre- and Post- Capital Controls

Mansor Ibrahim

Finance from University Library of Munich, Germany

Abstract: The paper implements time series techniques of cointegration and vector autoregression (VAR) to assess the integration or segmentation of Malaysian equity market prior to the Asian crisis and after the imposition of capital controls. We consider both regional and international financial forces represented by respectively the ASEAN markets and the advanced markets of US and Japan. We form three systems of share prices – (i) ASEAN markets; (ii) US, Japan and Malaysia; and (iii) US, Japan and ASEAN. Our findings suggest no long run relation among share prices in all systems before the Asian crisis and after the imposition of capital controls. However, there are substantial short run dynamic interactions among regional markets of ASEAN. We note significant responses of the Malaysian market to ASEAN shocks regardless of the sample periods. By contrast, its responses to innovations in US and Japan, while significant before the Asian crisis, turn insignificant after the imposition of capital controls. Comparatively, the US market is more influential in accounting for fluctuations in the ASEAN markets. From the results, while not attributing solely to capital control measures, we contend that capital controls play some role in insulating the Malaysian market from international disturbances.

Keywords: Integration and Segmentation; Cointegration; Vector Autoregression; Generalized Impulse Responses. (search for similar items in EconPapers)
JEL-codes: F33 G15 (search for similar items in EconPapers)
Pages: 34 pages
Date: 2004-11-05
New Economics Papers: this item is included in nep-fin and nep-ifn
Note: Type of Document - doc; pages: 34
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Related works:
Journal Article: Integration or Segmentation of the Malaysian Equity Market: An Analysis of Pre- and Post-Capital Controls (2006)
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Persistent link: https://EconPapers.repec.org/RePEc:wpa:wuwpfi:0411010

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