Capital Market Integration in the Pacific Basin Region: An Analysis of Real Interest Rate Linkages
December 1, 1995
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Summary
This paper investigates the extent to which financial markets in the Pacific Basin Region have become more integrated, by analyzing the comovements of real interest rates. The paper uses cointegration and error correction models and draws inferences on the degree of capital market integration by looking at the speed of adjustment of real interest rates following a shock. The results show that there has been an increase in capital market integration with both U.S. and Japan during the 1980s. Japan has not, however, overtaken U.S. in dominating the financial markets of these countries, except possibly in the case of Malaysia. Capital market integration is found to be greater in Singapore, Hong Kong and Taiwan Province of China. On the other hand, Japan is the least integrated country with the United States.
Subject: Balance of payments, Capital controls, Capital market integration, Economic integration, Financial services, Interest rate parity, Market interest rates, Real interest rates
Keywords: Asia and Pacific, Capital controls, capital market, Capital market integration, Central Asia, curb market, differential eit, East Asia, integration issue, interest rate, Interest rate parity, Market interest rates, real interest rate, real interest rate differential, real interest rate parity, Real interest rates, WP
Pages:
32
Volume:
1995
DOI:
Issue:
133
Series:
Working Paper No. 1995/133
Stock No:
WPIEA1331995
ISBN:
9781451855432
ISSN:
1018-5941
Notes
Examines comovements of real interest rates in Japan, Singapore, Hong Kong, Taiwan Province of China, Malaysia, and Korea.
