Global and Regional Financial Integration in Emerging Asia: Evidence from Stock Markets

Guglielmo Maria Caporale,Luis A,Gil-Alana,Kefei You 세종대학교 경제통합연구소 2021 Journal of Economic Integration Vol.36 No.2

This paper investigates if financial markets in emerging Asia have become more globally or regionally integrated since the Asian financial crisis in the late 1990s. It employs a price-based measure of integration, namely, stock return differentials, between 10 emerging Asian economies and the United Stated (US) (as an indicator of global integration), as well as Japan and the Asian region (as two alternative indicators of regional integration), to test for mean reversion and draw inferences regarding financial integration. This paper makes a three-fold contribution to the literature. It uses not only aggregate but also industry-level data on stock returns, it examines the impact of the 2008 crisis, and it adopts a more general fractional integration approach. The evidence suggests that in emerging Asia, on both the aggregate and industry (especially for the financial sector) levels, there is more regional than global integration, and that the former became even stronger during the post-2008 crisis period. Furthermore, Japan’s influence has been declining and the Chinese stock market has become more integrated, both regionally and globally.

Stock Market Integration Between Three CEECs

( Guglielmo Maria Caporale ),( Nicola Spagnolo ) 세종대학교 경제통합연구소 2012 Journal of Economic Integration Vol.27 No.1

This paper estimates a trivariate VAR-GARCH(1,1) model to examine volatility linkages between the stock markets of three Central and Eastern European countries (CEECs), namely the Czech Republic, Hungary and Poland. The empirical .findings suggest that following the EU accession regional linkages have become even stronger, and that therefore portfolio diversification within the region has become an even less effective investment strategy. This can be plausibly interpreted as reflecting deeper integration with the "old" EU economies, and has important implications for appropriate policy responses to shocks originating in those countries and affecting the .financial stability of the CEECs.

Multi-Factor Gegenbauer Processes and European Inflation Rates

( Guglielmo Maria Caporale ),( Luis A. Gil Alana ) 세종대학교 경제통합연구소(구 세종대학교 국제경제연구소) 2011 Journal of Economic Integration Vol.26 No.2

In this paper we specify a multi-factor long-memory process that enables us to estimate the fractional differencing parameters at each frequency separately, and adopt this framework to model quarterly prices in three European countries (France, Italy and the UK). The empirical results suggest that inflation in France and Italy is nonstationary. However, while for the former country this applies both to the zero and the seasonal frequencies, in the case of Italy the nonstationarity comes exclusively from the long-run or zero frequency. In the UK, inflation seems to be stationary with a component of long memory at both the zero and the semiannual frequencies, especially at the former. In all cases, we find evidence of mean reversion, implying that the effects of exogenous shocks on inflation are transitory and activist policies are not required in response to them. This process is slower in the case of France and Italy compared with the UK.

The Asymmetric Effects of a Common Monetary Policy in Europe

( Guglielmo Maria Caporale ),( Alaa M. Soliman ) 세종대학교 경제통합연구소 (구 세종대학교 국제경제연구소) 2009 Journal of Economic Integration Vol.24 No.3

This paper examines the monetary transmission mechanism in six EU member states. It provides useful empirical evidence for assessing the impact of a common monetary policy in the early stages of EMU, and enables us to form a view on how the regime change represented by EMU is likely to be translated into changes in policy multipliers in the various EU countries. The empirical analysis applies techniques recently developed by Wickens and Motto (2001) for identifying shocks by estimating a VECM for the endogenous variables, and a stationary VAR in first differences for the exogenous variables. Our findings suggest that there are significant differences between EU countries in the transmission mechanism of monetary policy.

REAL EXCHANGE RATES IN LATIN AMERICA: THE PPP HYPOTHESIS AND FRACTIONAL INTEGRATION

GUGLIELMO MARIA CAPORALE,Luis A. Gil-Alana 중앙대학교 경제연구소 2010 Journal of Economic Development Vol.35 No.2

This paper tests for PPP in a group of seventeen Latin American (LA) countries by applying fractional integration techniques to real exchange rate series. Compared to earlier studies on these economies, this approach has the advantage of allowing for non-integer values for the degree of integration, and thus for the possibility of PPP not holding continuously but as a long-run equilibrium condition. Further, breaks in the series are endogenously determined using a procedure based on the least-squares principle. This is particularly crucial in the Latin American countries, which have been affected by several exchange rate crises and policy regime changes. The results, based on different assumptions about the underlying disturbances, are in the majority of cases inconsistent with PPP, even more so when breaks are incorporated: Argentina is the only country for which clear evidence of mean reversion is found in the model including a break, albeit only in the second subsample.

Is Europe an Optimum Currency Area? Business Cycles in the EU

( Guglielmo Maria Caporale ),( Nikitas Pittis ),( Kyprianos Prodromidis ) 세종대학교 경제통합연구소(구 세종대학교 국제경제연구소) 1999 Journal of Economic Integration Vol.14 No.2

This paper aims to assess whether the EU is an optimum currency area (OCA) by examining synchronization of business cycles and long-run output linkages in the EU countries. We argue that a necessary condition for the desirability of EMU membership for national economies is that the degree of persistence of shocks affecting them should be similar Given the low power of unit root tests, we measure the relative importance of permanent versus transitory components in output. The existence of a "European business cycle" is confirmed by correlation and cointegration analysis respectively. Finally, it appears that monetary coordination, by reducing exchange rate volatility, results in more synchronised cycles. EMU is therefore likely to be a successful experience, since the benefits of monetary integration will outweigh the costs of surrendering the exchange rate instrument. (JEL Classification: E42, F36, F42)

Stock Market Development and Economic Growth: The Causal Linkage

Guglielmo Maria Caporale,Peter G, A Howells,Alaa M. Soliman 중앙대학교 경제연구소 2004 Journal of Economic Development Vol.29 No.1

This paper addresses the question: does stock market development cause growth? It examines the causal linkage between stock market development, financial development and economic growth. The argument is that any inference that financial liberalisation causes savings or investment or growth, or that financial intermediation causes growth, drawn from bivariate causality tests may be invalid, as invalid causality inferences can result from omitting an important variable. The empirical part of this study exploits techniques recently developed by Toda and Yamamoto (1995) to test for causality in VARs, and emphasises the possibility of omitted variable bias. The evidence obtained from a sample of seven countries suggests that a well-developed stock market can foster economic growth in the long run. It also provides support to theories according to which well-functioning stock markets can promote economic development by fuelling the engine of growth through faster capital accumulation, and by tuning it through better resource allocation.

Fiscal Consolidation: An Exercise in the Methodology of Coordination

( Guglielmo Maria Caporale ),( Michael Chui ),( Stephen G. Hall ),( Brian Henry ) 세종대학교 경제통합연구소 2005 Journal of Economic Integration Vol.20 No.1

This paper outlines a new methodology for the study of international policy coordination, which builds on two separate approaches previously used in the literature: optimal simple rules, and game-theoretic analysis. The new approach is illustrated by using the example of a changed target for the debt-income ratio in the G-3. The results suggest that there are few policy externalities when only fiscal policy is coordinated, whilst coordination of both fiscal and monetary policy results in substantial externalities and welfare improvements. Our findings reflect the fact that, unlike earlier studies, we focus on the strategic interaction between (domestic) policy makers, as well as the standard exchange rate and interest rate transmission mechanisms.

Real Exchange Rates in Latin America : The PPP Hypothesis and Fractional Integration

GUGLIELMO MARIA CAPORALE;LUIS A. GIL-ALANA 경제연구소 2010 Journal of Economic Development Vol.35 No.2

This paper tests for PPP in a group of seventeen Latin American (LA) countries by applying fractional integration techniques to real exchange rate series. Compared to earlier studies on these economies, this approach has the advantage of allowing for non-integer values for the degree of integration, and thus for the possibility of PPP not holding continuously but as a long-run equilibrium condition. Further, breaks in the series are endogenously determined using a procedure based on the least-squares principle. This is particularly crucial in the Latin American countries, which have been affected by several exchange rate crises and policy regime changes. The results, based on different assumptions about the underlying disturbances, are in the majority of cases inconsistent with PPP, even more so when breaks are incorporated: Argentina is the only country for which clear evidence of mean reversion is found in the model including a break, albeit only in the second subsample.

Is Europe an Optimum Currency Area? Business Cycles In the EU

Caporale, Guglielmo Maria,Pittis, Nikitas,Peodromidis, Kyprianos 세종대학교 국제경제연구소 1999 Journal of Economic Integration Vol.14 No.2

This paper aims to assess whether the EU is an optimum currency area(OCA) by examining synchronization of business cycle and long-run output linkages in the EU countries. We argue that a necessary condition for the desirability of EMU membership for national economies is that the degree of persistence of shocks affecting them should be similar. Given the low power of unit root tests, we measure the relative importance of permanent versus transitory components in output. The existence of a "European business cycle" is confirmed by correlation and cointegration analysis respectively. Finally, it appears that monetary coordination, by reducing exchange rate volatility, results in more synchronised cycles. EMU is therefore likely to be a successful experience, since the benefits of monetary integration will outweigh the costs of surrendering the exchange rate instrument. (JEL Classification: E42, F36, F42)