Drivers of Financial Integration – Implications for Asia

Nasha Ananchotikul, Shi Piao and Edda Zoli

No 2015/160, IMF Working Papers from International Monetary Fund

Abstract: Deeper intraregional financial integration is prominent on Asian policymakers’ agenda. This paper takes stock of Asia’s progress toward that objective, analyzing recent trends in cross-border portfolio investment and bank claims. Then, it investigates the drivers of financial integration by estimating a gravity model of bilateral financial asset holdings on a large sample of source and destination countries worldwide, focusing in particular on the role of regulation and institutions. The paper concludes that financial integration in Asia could be enhanced through policies that lower informational frictions, continue to buttress trade integration and capital market development, remove restrictions to foreign flows and bank penetration, and promote a common regulatory framework.

Keywords: WP; investment; bank; Asia; Financial integration; regulation; portfolio investment; market size; capital account; bank claim; banking regulation Index; security exchange regulation; Foreign banks; Portfolio investment; Capital account; Stock markets; Asia and Pacific; Southeast Asia (search for similar items in EconPapers)
Pages: 41
Date: 2015-07-17
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Citations: View citations in EconPapers (6)

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