Financial integration in East Asia: Evidence from panel unit root and panel cointegration tests

The aim of this paper is to investigate the degree of financial integration for selected East Asian countries from 1988 to 2006 using the recently developed panel unit root and panel cointegration techniques. Investment and savings rates are found to be nonstationary and not to be cointegrated in pa...

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Bibliographic Details
Published in:Journal of Asian economics 2009-05, Vol.20 (3), p.314-326
Main Author: Guillaumin, Cyriac
Format: Article
Language:English
Subjects:
Cointegration analysis
East Asia
Economic models
Feldstein–Horioka puzzle
Financial integration
Financial integration Feldstein-Horioka puzzle Nonstationary panel data Panel cointegration East Asia
Investment
Investments
Nonstationary panel data
Panel cointegration
Regional development
Saving
Savings
Studies
Trade liberalization
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Summary:The aim of this paper is to investigate the degree of financial integration for selected East Asian countries from 1988 to 2006 using the recently developed panel unit root and panel cointegration techniques. Investment and savings rates are found to be nonstationary and not to be cointegrated in panels. We estimate modified Feldstein–Horioka equations and our results reveal a high degree of financial integration. When we homogenize our data, results show that high-income countries have stronger financial integration than middle-income countries. Finally, we proceed to stability tests in order to test if there is a crisis effect and we find that financial integration is stronger in the post-crisis period.
ISSN:1049-0078
1873-7927
DOI:10.1016/j.asieco.2009.02.002