The response of the Indian stock market to the movement of Asia's emerging markets: From isolation toward integration?

Seungwook Bahng

Global Economic Review, 2003, vol. 32, issue 2, 43-58

Abstract: This paper investigates the existence of the inter-dependence between the Indian stock market and Asia's emerging markets since 1990. This study analyzes whether the MSCI Asian Index has significantly influenced the Bombay Stock Exchange Index before, during, and after the Asian financial crisis. To address this issue, the author first uses a rolling correlation, and conduct uni-directional and bi-directional causality tests using the Granger causality test. He then examines the impulse response functions and variance decompositions of forecast errors based on a VAR (vector auto-regression) model. These tests provide evidence that the influence of the Asian market on the Indian market has increased during and after the Asian financial crisis. These results can be interpreted as evidence that the Indian market has been moving toward integration with other Asian markets.

Keywords: Indian stock market; Asian financial crisis; VAR; Bombay stock exchange; Asia's emerging markets (search for similar items in EconPapers)
Date: 2003
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DOI: 10.1080/12265080308422917

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