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What Hinders Cross-Border Portfolio Investment In East Asia?

Author

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  • DAEKEUN PARK

    (College of Economics and Finance, Hanyang University, Seoul, Korea)

  • INSEOK SHIN

    (College of Business, Chung-Ang University, Seoul, Korea)

Abstract

We examine statistical importance of a number of institutional factors, which have been alleged by market investors and policy commentators as significant barriers on cross-border portfolio investment in East Asian economies, but never been put to empirical tests yet. Taking advantage of the novel data set constructed by the ABMI-GoE, we empirically investigate the explanatory power of such institutional factors as market access-hindering regulations, foreign exchange controls, credit controls, taxation and inefficient post-trading infrastructure. We find that these alleged barriers indeed have significantly negative impacts on cross-border portfolio investment in East Asian economies. In addition, we find some support for the "pecking order" hypothesis in barriers on cross-border portfolio investment in the sense that barriers on post-trading efficiency and cost barriers are not effective unless barriers on market access are significantly lowered.

Suggested Citation

  • Daekeun Park & Inseok Shin, 2013. "What Hinders Cross-Border Portfolio Investment In East Asia?," The Singapore Economic Review (SER), World Scientific Publishing Co. Pte. Ltd., vol. 58(02), pages 1-22.
    • Handle: RePEc:wsi:serxxx:v:58:y:2013:i:02:n:s0217590813500124
    DOI: 10.1142/S0217590813500124
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    References listed on IDEAS

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    Cited by:

    1. Sang Rim Choi & Daekeun Park & Adrian E. Tschoegl, 2016. "Banks and the World’s Major Banking Centers, 2010," Global Economy Journal (GEJ), World Scientific Publishing Co. Pte. Ltd., vol. 16(2), pages 275-291, June.
    2. Lathaporn Ratanavararak, 2018. "The Impact of Imperfect Financial Integration and Trade on Macroeconomic Volatility and Welfare in Emerging Markets," PIER Discussion Papers 79, Puey Ungphakorn Institute for Economic Research.

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    More about this item

    Keywords

    Cross-border portfolio investment; barriers to cross-border investment; Asian Bond Markets Initiative; foreign exchange controls; settlement infrastructure; F3; G15;
    All these keywords.

    JEL classification:

    • F3 - International Economics - - International Finance
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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