CHEER and markets’ integration: evidence from selected East Asian economies

Minoas Koukouritakis

Journal of Chinese Economic and Foreign Trade Studies, 2024, vol. 17, issue 2/3, 152-169

Abstract: Purpose - This paper aims to investigate markets’ integration using the capital enhanced equilibrium exchange rate (CHEER) model for seven, highly competitive, East Asian countries. Design/methodology/approach - The sample consists of monthly observations, whereas unit root and cointegration techniques with structural shifts have been used. Findings - The evidence shows that the weak form of the CHEER approach holds for Malaysia and Thailand. For China, Japan, Korea, Singapore and Taipei, only the uncovered interest parity condition is validated, implying capital markets integration. In contrast, for these five countries, the results indicate absence of goods’ markets integration. This outcome can be attributed to the impact of quite high non-tariff barriers and the Balassa–Samuelson effect. Originality/value - To the best of the author’s knowledge, this is the first study that investigate markets’ integration in several East Asian economies, using the CHEER approach and more accurate price indices.

Keywords: East Asian economies; CHEER; Structural breaks; Cointegration; Capital and goods’ market integration; F15; F31; F41 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eme:jcefts:jcefts-01-2024-0002

DOI: 10.1108/JCEFTS-01-2024-0002

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