Financial Integration in Emerging Asia: Challenges and Prospects
Policy makers in the emerging Asia must strike the right balance between maximizing the net benefits from regional and global financial openness, and minimizing the potential costs of financial contagion and crisis.
Using both quantity- and price-based measures, this paper shows an increasing degree of financial integration in emerging Asian markets. However, the region’s equity markets are integrated more globally than regionally, while its local currency bond markets remain generally segmented. A case can be made for further regional integration of financial markets, as financial integration at the regional level brings benefit from allocation efficiency and risk diversification while containing the risk of financial contagion.
- Financial Integration Trends in Asia
- Financial Integration and Risk of Contagion
- Conclusions and Policy Implications