Financial Integration in East Asia

An Empirical Investigation

Hyun Hoon Lee, Hyeon-Seung Huh, Donghyun Park

Research output: Contribution to journalArticle

7 Citations (Scopus)

Abstract

The central objective of this paper is to empirically evaluate the degree of linkages among East Asian equity and bond markets. Using data from the IMF's Coordinated Portfolio Investment Survey (CPIS), we find that intra-East Asian financial asset holdings of four East Asian countries - Japan, Korea, Hong Kong and Singapore - are larger than the levels predicted by the financial gravity model. However, our analysis suggests that this result is likely to be driven by intra-regional trade linkages and reflect those linkages. Therefore, the salient implication for regional policymakers is that they should continue to promote intra-regional financial integration. This paper also aims to analyse the impact of three different types of country-specific risks - political, economic and financial risks - on investment from the four countries. This analysis yields a clear positive relationship between destination-country risk, in particular political risk, and capital inflows.

Original languageEnglish
Pages (from-to)396-418
Number of pages23
JournalWorld Economy
Volume36
Issue number4
DOIs
Publication statusPublished - 2013 Apr 1

Fingerprint

IMF
Korea
Singapore
Hong Kong
assets
equity
Japan
East Asia
Financial integration
Empirical investigation
market
economics
Linkage
Political risk
Asia
Financial risk
Destination
Portfolio investment
Financial assets
Equity markets

All Science Journal Classification (ASJC) codes

  • Accounting
  • Finance
  • Economics and Econometrics
  • Political Science and International Relations

Cite this

Lee, Hyun Hoon ; Huh, Hyeon-Seung ; Park, Donghyun. / Financial Integration in East Asia : An Empirical Investigation. In: World Economy. 2013 ; Vol. 36, No. 4. pp. 396-418.
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Financial Integration in East Asia : An Empirical Investigation. / Lee, Hyun Hoon; Huh, Hyeon-Seung; Park, Donghyun.

In: World Economy, Vol. 36, No. 4, 01.04.2013, p. 396-418.

Research output: Contribution to journalArticle

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