Assessing Financial Market Integration In Asia - Equity Markets

Ip-wing Yu, Laurence Fung and Chi-sang Tam
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Ip-wing Yu: Research Department, Hong Kong Monetary Authority
Laurence Fung: Research Department, Hong Kong Monetary Authority
Chi-sang Tam: Research Department, Hong Kong Monetary Authority

No 704, Working Papers from Hong Kong Monetary Authority

Abstract: Financial integration has strong implications for financial stability. On the one hand, financial integration among economies helps improve their capacity to absorb shocks and foster development. On the other hand, intensified financial linkages in a world of increasing capital mobility may also harbour the risk of cross-border financial contagion. This paper provides a survey of indicators to monitor the development, measure progress and assess the state of equity market integration in Asia. A combined use of these indicators would provide information on different dimensions of integration and thus give regulators a more balanced picture of the general trend of equity market integration in the region. Our empirical results broadly show that a lot of progress has been witnessed between 1994 and 2001 in achieving greater integration among the Asian equity markets. However, the extent of financial integration remains weak and the integration process appears to have stalled since 2002.

Keywords: Financial integration; Kalman filter; Cointegration; Common component; Synchronisation; Dynamic correlation (search for similar items in EconPapers)
JEL-codes: C13 C22 F36 G15 (search for similar items in EconPapers)
Pages: 37 pages
Date: 2007-04
New Economics Papers: this item is included in nep-sea
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Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:hkg:wpaper:0704

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