Financial integration in emerging Asia: Challenges and prospects

Cyn Young Park, Jong Wha Lee

Research output: Contribution to journalArticle

29 Citations (Scopus)

Abstract

Using both quantity- and price-based measures of financial integration, the paper shows an increasing degree of financial openness and integration in emerging Asia. Assessing the impact of a regional shock relative to a global shock on local equity and bond markets, the findings suggest that the region's equity markets are integrated more globally than regionally, although the degrees of both regional and global integration have increased significantly since the 1997/1998 Asian financial crisis. However, emerging Asia's local currency bond markets remain generally segmented, being neither regionally nor globally integrated. There are potential benefits from increased regional integration of financial markets. Financial integration at the regional level allows for the region's economies to benefit from allocation efficiency and risk diversification. Policymakers in the region must strike the right balance between maximizing the net benefits from regional and global financial openness, and minimizing the potential costs of financial contagion and crisis.

Original languageEnglish
Pages (from-to)176-198
Number of pages23
JournalAsian Economic Policy Review
Volume6
Issue number2
DOIs
Publication statusPublished - 2011 Dec

Keywords

  • Asian financial integration
  • Capital flow volatility
  • Contagion and spillover
  • Convergence of asset return
  • Cross-border asset holding

ASJC Scopus subject areas

  • Economics, Econometrics and Finance(all)
  • Political Science and International Relations
  • Management, Monitoring, Policy and Law

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