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Financial Market Integration of South Asian Countries: Panel data Analysis

Author

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  • Mohsin, H
  • Rivers, P

Abstract

According to Frankel (1992) in order to find financial integration from Feldstein Horoika (FH, 1980) model, the real interest parity must hold. This paper estimates the degree of financial market integration of South Asian countries i.e. Pakistan, India, Bangladesh, Sri Lanka and Nepal with both the techniques. The study finds some degree of integration with FH model has which increased after 1990s, post liberalization period. Furthermore, Panel Unit Root techniques i.e. LLC, IPS and Hadri has been used to estimate the real interest rate differentials (RIDs) of South Asian countries are found to be stationary with USA, Canada, UK, Germany, Sweden, Netherland, Australia, Malaysia, Indonesia, South Korea, Singapore, China and Japan. The empirical evidence of integration with both the techniques in my study is unique in the literature. Even though, the RIDS technique provides strong evidence of integration, correlation between savings and investment is still significant.

Suggested Citation

  • Mohsin, H & Rivers, P, 2010. "Financial Market Integration of South Asian Countries: Panel data Analysis," MPRA Paper 25774, University Library of Munich, Germany, revised Aug 2010.
    • Handle: RePEc:pra:mprapa:25774
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    File URL: https://mpra.ub.uni-muenchen.de/25774/1/MPRA_paper_25774.pdf
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    References listed on IDEAS

    as
    1. Kaddour Hadri, 2000. "Testing for stationarity in heterogeneous panel data," Econometrics Journal, Royal Economic Society, vol. 3(2), pages 148-161.
    2. Imad Moosa & Razzaque Bhatti, 1997. "Are Asian Markets Integrated? Evidence for Six Countries Vis-A-Vis Japan," International Economic Journal, Taylor & Francis Journals, vol. 11(1), pages 51-67.
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    Cited by:

    1. 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.
    2. 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.
    3. Shravani ‎ & Supran Kumar Sharma, 2020. "Financial Development and Economic Growth in Selected Asian Economies: A Dynamic Panel ARDL Test," Contemporary Economics, University of Economics and Human Sciences in Warsaw., vol. 14(2), June.
    4. J. Vineesh Prakash & D. K. Nauriyal, 2021. "Integration and Interdependence Among Equity Markets in South Asia: Measuring Through ARDL Bounds Approach," Millennial Asia, , vol. 12(2), pages 229-251, August.

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    More about this item

    Keywords

    Financial Integration; interest rate parity; savings investment correlation; South Asian economy;
    All these keywords.

    JEL classification:

    • E2 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment
    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration

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