The Evolution of Asian Financial Linkages: Key Determinants and the Role of Policy
November 1, 2012
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Summary
This paper examines how Asian financial linkages with systemic economies have changed over time. After developing a factor model, it estimates Asian financial sensitivities to systemic economies, and then seeks to uncover their key determinants, which include trade and financial linkages, as well as policies. In line with Asia’s growing role in the global economy—including through deeper financial integration—regional financial markets have become more sensitive to systemic economies. Asian financial sensitivities to systemic economies exhibit cyclical fluctuations, and reached historically high levels during the latest global financial crisis of 2008–09. While macroeconomic policy frameworks have helped Asian economies cope well with market turbulence, they cannot completely insulate Asian financial markets against major global financial shocks.
Subject: Balance of payments, Banking, Exchange rate arrangements, Financial institutions, Financial markets, Foreign direct investment, Foreign exchange, National accounts, Return on investment, Stock markets, Stocks
Keywords: Asia, Asia and Pacific, beta, economy c, Exchange rate arrangements, financial linkages, financial market spillover, Foreign direct investment, GDP ×, Global, global financial crisis, market portfolio return, Return on investment, risk premium, Stock markets, Stocks, systemic economy, WP
Pages:
27
Volume:
2012
DOI:
Issue:
262
Series:
Working Paper No. 2012/262
Stock No:
WPIEA2012262
ISBN:
9781475588682
ISSN:
1018-5941
