Real and Financial Integration in East Asia
Kim, Soyoung; Lee, Jong-Wha | June 2008
Abstract
We examine the real and financial integration of East Asian economies, comparing the degree
of real versus financial integration, the degree of global versus regional integration, and the
extent of integration before versus after the 1997/98 financial crisis in East Asian economies.
We analyze price and quantity measures of integration such as the size of intra-and
interregional trade, cross-border financial assets, correlation of stock returns, and interest rate
differentials. In addition, we adopt a panel VAR approach of investigating cross-country output
inter-dependence and consumption relation in order to infer the macroeconomic consequences
of real and financial integration on East Asian economies. The empirical investigations suggest
that (i) using the quantity measure there is a significant increase in real integration within East
Asia; (ii) real-side integration based on output linkage increased substantially after the Asian
crisis, both regionally and globally; (iii) although quantity and price measures showed some
degree of increased financial integration after the crisis, the cross-country consumption relation
did not change much; (iv) the degree of regional financial integration within Asia is far smaller
than the degree of global financial integration, based on the consumption-based measure; and
(v) financial integration lags real integration, especially for regional integration within Asia.
Citation
Kim, Soyoung; Lee, Jong-Wha. 2008. Real and Financial Integration in East Asia. © Asian Development Bank. http://hdl.handle.net/11540/1771. License: CC BY 3.0 IGO.Keywords
Macroeconomic
Macroeconomic Analysis
Macroeconomic Framework
Macroeconomic Models
Macroeconomic Performance
Macroeconomic Planning
Macroeconomic Policies
Macroeconomic Reform
Macroeconomic Stabilization
Social condition
Economic dependence
Economic assistance
International monetary relations
International monetary relations
International trade
National accounting
Market
Exchange
Comparative economics
Index number
Monetary policy
Value analysis
Adjustment cost
Transaction cost
Conditionality
International relations
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Citable URI
http://hdl.handle.net/11540/1771Metadata
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