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Financial Integration and Cooperation in East Asia: Assessment of Recent Developments and Their Implications

Author

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  • Hong Bum Jang

    (Visiting Economist, Institute for Monetary and Economic Studies, Bank of Japan/ Director-General, Bank of Korea (E-mail: jhb@bok.or.kr))

Abstract

This paper examines the current situation pertaining to trade and financial integration in East Asia from various approaches and discusses potential linkages between intra-regional trade and financial integration. This paper also offers policy suggestions based upon its analyses that take full account of the post-global crisis policy landscape. The main conclusions drawn from this study are as follows: (i) the overall degree of intra-regional trade and financial integrations in East Asia still remain insufficient, as the region fs financial integration lags far behind its trade integration; (ii) inter-regional links appear stronger than intra-regional links in East Asian economies; and (iii) intra-regional trade and portfolio investment flows in East Asia generally show positive correlations. Developing East Asia would benefit from wider regional mechanisms with the enhancement of intra- regional trade and financial integration. Since East Asia is at a critical turning point, this paper suggests that East Asian countries strive to strengthen the regional mechanisms with smoothly functioning, integrated regional markets while effectively controlling its risks. They should focus especially on enhancing trade policy cooperation, expediting capital market development, effectively managing cross-border portfolio investments, and strengthening regional safety networks. The three major countries in the region-Japan, China, and Korea-should take the lead in facilitating the integration process.

Suggested Citation

  • Hong Bum Jang, 2011. "Financial Integration and Cooperation in East Asia: Assessment of Recent Developments and Their Implications," IMES Discussion Paper Series 11-E-05, Institute for Monetary and Economic Studies, Bank of Japan.
    • Handle: RePEc:ime:imedps:11-e-05
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    File URL: http://www.imes.boj.or.jp/research/papers/english/11-E-05.pdf
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    Cited by:

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    3. Glick, Reuven & Hutchison, Michael, 2013. "China's financial linkages with Asia and the global financial crisis," Journal of International Money and Finance, Elsevier, vol. 39(C), pages 186-206.
    4. Sanjay Sehgal & Piyush Pandey & Florent Deisting, 2018. "Time varying integration amongst the South Asian equity markets: An empirical study," Cogent Economics & Finance, Taylor & Francis Journals, vol. 6(1), pages 1452328-145, January.
    5. Inderjit Kaur & Nirvikar Singh, 2014. "Financial Integration and Financial Development in East Asia," Millennial Asia, , vol. 5(1), pages 1-22, April.
    6. Sanjay Sehgal & Piyush Pandey & Florent Deisting, 2018. "Stock Market Integration Dynamics and its Determinants in the East Asian Economic Community Region," Journal of Quantitative Economics, Springer;The Indian Econometric Society (TIES), vol. 16(2), pages 389-425, June.

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    More about this item

    Keywords

    Trade and Financial Integration; Cross-Border Investment and Settlement; Trade-Finance Linkage; Free Trade Agreements; Asian Bond Market; East Asia; Global Economic and Financial Crisis;
    All these keywords.

    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • F15 - International Economics - - Trade - - - Economic Integration
    • F42 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Policy Coordination and Transmission
    • F59 - International Economics - - International Relations, National Security, and International Political Economy - - - Other
    • G01 - Financial Economics - - General - - - Financial Crises
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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