Real Financial Integration among the East Asian Economies: A SURADF Panel Approach
Tze-Haw Chan (),
Ahmad Zubaidi Baharumshah () and
Evan Lau ()
MPRA Paper from University Library of Munich, Germany
To testify RIP, this study scrutinizes the mean-reversion behavior of bilateral real interest differentials (RIDs) in eight East Asian economies. We incorporate the ASEAN-5, South Korea and China (mainland) with the US and Japan taken as base countries. Four sub-samples within 1976-2004 are being considered to accentuate the effects of institutional changes and financial crises. To rectify the deficiency in extant univariate and panel tests, the newly proposed SURADF statistics by Breuer et al. (2002) is utilized. Overall, the findings are in favor of RIP such that RIDs are found mean-reverting (except China) and with faster adjustment, especially during the post-crisis era. Such outcome is in accord with the enhanced financial integration among the ASEAN-5 and South Korea with their major trading partners, suggesting that further economic cooperation and currency arrangements in the region are bright to preserve potential financial shocks. Conversely, the real financial integration among China-US and China-Japan are not yet empirically recognized notwithstanding the recent surge of capital flows into the mainland.
Keywords: Real Interest Differentials; SURADF Panel Unit Root Test; Half-life; Confidence Intervals; Financial Integration (search for similar items in EconPapers)
JEL-codes: G15 C13 F36 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cna and nep-sea
Date: 2005, Revised 2007-02
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:2021
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