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Asian Financial Integration: Global or Regional? Evidence from Money and Bond Markets

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Asian Financial Integration: Global or Regional? Evidence from Money and Bond Markets. / Rughoo, Aarti; You, Kefei .

In: International Review of Financial Analysis, Vol. 48, 01.12.2016, p. 419-434.

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@article{b1d640211570406e8f940c3ecac21472,
title = "Asian Financial Integration: Global or Regional?: Evidence from Money and Bond Markets",
abstract = "This paper investigates the degree of global versus regional financial integration in Southeast Asia during the period 2004-2012. We examine integration in the money and bond markets in Asia by employing a covered-interest-parity-based measure of financial integration. The impact of the 2008 financial crisis as well as the recent regional bond initiatives on the integration process of Asian money and bond markets respectively are specifically investigated. Empirically, we adopt the Phillips and Sul (2007) convergence methodology that has not been previously employed to examine the integration process in Asian money and bond markets. We find evidence of both global and regional integration in the money market pre 2008 but once the crisis hit, the process of global integration comes to an abrupt halt. However, regional integration, albeit at a slower pace, is still clearly evident in the post-crisis period. As for the Asian bond market, evidence of both global and regional integration is found but, in comparison, the latter is more convergent post 2008. Regional integration is stronger when interest rates with longer maturity are considered. In addition, we identify some convergent sub-groups of countries and this suggests that a multi-tiered style of convergence is present.",
keywords = "Financial integration , Panel convergence, Money market, Bond market",
author = "Aarti Rughoo and Kefei You",
note = "This is the accepted manuscript version of an article accepted for publication in International Review of Financial Analysis, after peer review, and is made available under the terms of the CC-BY-NC-ND 4.0 license http://creativecommons.org/licenses/by-nc-nd/4.0/ The final, definitive Version of Record is available online via: https://doi.org/10.1016/j.irfa.2015.03.007",
year = "2016",
month = dec,
day = "1",
doi = "10.1016/j.irfa.2015.03.007",
language = "English",
volume = "48",
pages = "419--434",
journal = "International Review of Financial Analysis",
issn = "1057-5219",
publisher = "Elsevier Inc.",

}

RIS

TY - JOUR

T1 - Asian Financial Integration: Global or Regional?

T2 - Evidence from Money and Bond Markets

AU - Rughoo, Aarti

AU - You, Kefei

N1 - This is the accepted manuscript version of an article accepted for publication in International Review of Financial Analysis, after peer review, and is made available under the terms of the CC-BY-NC-ND 4.0 license http://creativecommons.org/licenses/by-nc-nd/4.0/ The final, definitive Version of Record is available online via: https://doi.org/10.1016/j.irfa.2015.03.007

PY - 2016/12/1

Y1 - 2016/12/1

N2 - This paper investigates the degree of global versus regional financial integration in Southeast Asia during the period 2004-2012. We examine integration in the money and bond markets in Asia by employing a covered-interest-parity-based measure of financial integration. The impact of the 2008 financial crisis as well as the recent regional bond initiatives on the integration process of Asian money and bond markets respectively are specifically investigated. Empirically, we adopt the Phillips and Sul (2007) convergence methodology that has not been previously employed to examine the integration process in Asian money and bond markets. We find evidence of both global and regional integration in the money market pre 2008 but once the crisis hit, the process of global integration comes to an abrupt halt. However, regional integration, albeit at a slower pace, is still clearly evident in the post-crisis period. As for the Asian bond market, evidence of both global and regional integration is found but, in comparison, the latter is more convergent post 2008. Regional integration is stronger when interest rates with longer maturity are considered. In addition, we identify some convergent sub-groups of countries and this suggests that a multi-tiered style of convergence is present.

AB - This paper investigates the degree of global versus regional financial integration in Southeast Asia during the period 2004-2012. We examine integration in the money and bond markets in Asia by employing a covered-interest-parity-based measure of financial integration. The impact of the 2008 financial crisis as well as the recent regional bond initiatives on the integration process of Asian money and bond markets respectively are specifically investigated. Empirically, we adopt the Phillips and Sul (2007) convergence methodology that has not been previously employed to examine the integration process in Asian money and bond markets. We find evidence of both global and regional integration in the money market pre 2008 but once the crisis hit, the process of global integration comes to an abrupt halt. However, regional integration, albeit at a slower pace, is still clearly evident in the post-crisis period. As for the Asian bond market, evidence of both global and regional integration is found but, in comparison, the latter is more convergent post 2008. Regional integration is stronger when interest rates with longer maturity are considered. In addition, we identify some convergent sub-groups of countries and this suggests that a multi-tiered style of convergence is present.

KW - Financial integration

KW - Panel convergence

KW - Money market

KW - Bond market

U2 - 10.1016/j.irfa.2015.03.007

DO - 10.1016/j.irfa.2015.03.007

M3 - Article

VL - 48

SP - 419

EP - 434

JO - International Review of Financial Analysis

JF - International Review of Financial Analysis

SN - 1057-5219

ER -