Capital Market Integration in the Pacific Basin Region: An Analysis of Real Interest Rate Linkages

Kate Phylaktis

No 1995/133, IMF Working Papers from International Monetary Fund

Abstract: This paper investigates the extent to which financial markets in the Pacific Basin Region have become more integrated, by analyzing the comovements of real interest rates. The paper uses cointegration and error correction models and draws inferences on the degree of capital market integration by looking at the speed of adjustment of real interest rates following a shock. The results show that there has been an increase in capital market integration with both U.S. and Japan during the 1980s. Japan has not, however, overtaken U.S. in dominating the financial markets of these countries, except possibly in the case of Malaysia. Capital market integration is found to be greater in Singapore, Hong Kong and Taiwan Province of China. On the other hand, Japan is the least integrated country with the United States.

Keywords: WP; real interest rate; interest rate; real interest rate differential; capital market; curb market; real interest rate parity; integration issue; differential eit; Real interest rates; Capital market integration; Interest rate parity; Market interest rates; Capital controls; Central Asia; East Asia; Asia and Pacific (search for similar items in EconPapers)
Pages: 32
Date: 1995-12-01
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Citations: View citations in EconPapers (3)

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Journal Article: Capital market integration in the Pacific-Basin region: An analysis of real interest rate linkages (1997)
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