Regional integration in East Asia. From market-driven regionalisation to institutionalised regionalism?

Langhammer, Rolf J.

doi:10.1007/bf02709080

Cited by 15 publications

(7 citation statements)

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“…These facts are the evidence that the gap exists between East Asian emerged equity markets and their emerging counterparts in Southeast Asia. Due to differences in resources endowments and open economic policy, trade and foreign direct investments relationship between two regions are significantly high and increasing continually (Langhammer, 1995), suggesting that the equity markets in these two regions are also closely connected. The Table II below displays the trade and investment relationships between East and Southeast Asian countries.…”

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confidence: 99%

Integration between East and Southeast Asian equity markets

Arsyad

2015

Journal of Financial Economic Policy

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Purpose – This paper aims to seek to find answers to three questions. First, is there any possibility of long-term cointegration between East and Southeast Asian equity markets? If so, how many cointegrating equations are there? Second, what are the short-term causal relationships between equity markets in East and Southeast Asia? Third, what is the East Asia’s most influential equity market toward their Southeast counterparts, and vice versa? Design/methodology/approach – This study uses Johansen's (1988) cointegration method to test long-run relationships among East and Southeast Asian equity markets. With regards to short-run causal relationships, this study uses Granger-causality test as well as the forecast variance decomposition method. Findings – Johansen test proves that there is cointegration between East and Southeast Asian equity markets, but the integration process is not complete. Cointegrating vector also provides evidence that member countries of ASEAN+3 respond differently to external shocks. With regards to short-run causal direction, this study finds that Japan Granger-causes all equity markets in Southeast Asia, while Singapore and Vietnam Granger-cause all equity markets in East Asia. These results imply that Japan is the market with most linkages in Southeast Asia, while Singapore and Vietnam are the markets with most linkages to East Asia. Furthermore, forecast variance decomposition reveals that Japan is the East Asia’s most influential equity markets, while Singapore is the most influential equity market in Southeast Asia. This study suggests that policymakers in East and Southeast Asian countries to synchronize the capital market standards and regulations as well as to reduce the barriers for capital mobility to spur the regional equity market integration. Research limitations/implications – Increasing integration of East and Southeast Asian capital markets forces policymakers in ASEAN+3 countries to synchronize monetary policies, as it has been found that regionally integrated capital markets reduce the degree of independent monetary policy (Logue et al., 1976). It is therefore important for policymakers in East and Southeast Asian countries to assess the possibility of stock market integration within this region to anticipate the future risks associated with economic integration as well as to build collective regional institutions (Wang, 2004). Click and Plummer (2005) also argued that integrated stock markets is more efficient than nationally segmented equity markets, and the efficiency of Asian capital markets has been questioned in particular after the 1997 Asian financial crises. Yet, the empirical evidence on the extent of financial integration among ASEAN+3 member countries has been limited and inconclusive. This study is therefore an attempt to investigate the recent development of ASEAN+3 equity markets integration. Practical implications – This study focuses its attention on the existence and the extent of financial integration in East and Southeast Asia region, and it provides evidence that equity market integration in ASEAN+3 is far from complete, and for that reason, there is a need for policymakers in ASEAN+3 member countries to synchronize their standards and regulations. Furthermore, the policymakers in East and Southeast Asia can gain benefit from this study, as it provides the evidence that ASEAN+3 member countries respond differently to policy shocks, which may hinder the development of regional financial integration as well as the policy effectiveness of region-wide authority in ASEAN+3. Originality/value – This research is different from previous studies, as it puts the regional financial integration within the context of ASEAN+3 frameworks. Unlike previous research that considers East and Southeast Asian countries as an individual entity, this research considers East and Southeast Asia into two different blocks, following Tourk (2004) who documented that negotiation process for ASEAN+3 financial integration is conducted in sub-regional level (ASEAN vs East Asia), rather than national level (country per country basis). Second, this study covers the period after the 1997 Asian financial crisis. As suggested in Wang (2014), that the degree of stock market integration tends to change around the periods marked by financial crises, the updated study on Asian financial integration in the aftermath of 1997 financial crises is important to document the development of regional financial integration.

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confidence: 99%

Integration between East and Southeast Asian equity markets

Arsyad

2015

Journal of Financial Economic Policy

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“…Neither a customs union, a free trade area nor an institution, APEC members have merely conceded to keeping their economies open to freer ßows of investments and products in the PaciÞc. Hence, even ASEAN, which aims to create a free trade area in 10 yearsÕ time, has resisted deeper integration as noted earlier, with Langhammer (1995) arguing that deeper institution or policy arrangements are only marginally useful here because many countries have liberalized their economies without any signiÞcant regional arrangement.…”

Section: Open and Closed Regionalizationmentioning

confidence: 96%

“…It follows from such differences that while policy-makers in the Asia-PaciÞc are not completely averse to PaciÞc region-building, they advocate a model that is different from that of Europe, one of open regionalization. This is a sort of open economic association, based on voluntary understanding without supranational authority (Langhammer, 1995;Wonnacott, 1995) and an alleged consensual style of negotiation. At the same time that economic linkages are being developed and enhanced among member countries, the region also becomes more open to trade with the rest of the world.…”

Section: Open and Closed Regionalizationmentioning

confidence: 99%

“…Except for resource-rich countries like Australia, Brunei and Indonesia, most other countries in the region have a trade deficit with Japan. One explanation for this is the strong complementary trading relationship between Japan and many Asian-PaciÞc countries, particularly as Japan is poor in natural resources (Langhammer, 1995), and suffering increasingly from high labor costs and shortages. Such a relationship is encompassed in what has been labeled the ÔFlying GeeseÕ pattern of development (Chen, 1992), which describes the division of labor that is taking place in the region.…”

Section: The Impact Of Internationalizationmentioning

confidence: 99%

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Inter‐country trade patterns in europe and the asia‐pacific: regional structure and extra‐regional trends

Poon

1997

Geografiska Annaler: Series B, Human Geography

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This paper examines the regional structure and extraregional trends of Europe and the Asia‐Pacific. The formation of the European Community and the latter's potential enlargement to Eastern Europe contrasts with the Asia‐Pacific which has resisted economic and political integration and pursued economic linkages with countries outside of the region. The difference in regionalization tendencies have resulted in more geographically defined subregions in Europe, and greater territorial fragmentation in the Asia‐Pacific. Even though European countries exhibit tighter interlinkages with one another, the evidence indicates that their extra‐regional links compare favorably with the Asia‐Pacific for much of the period from 1965 to 1994.

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“…Portfolio flows of capital also show evidence of regional patterns emerging through intense competition [Langhammer, 1995]. We believe that the substantial growth in regional trade harnessed an over dependence upon the fortunes of the region.…”

Section: Introductionmentioning

confidence: 75%

The impact of liberalization and regionalism upon capital markets in emerging Asian economies

Bilson

Hooper

Jaugietis³

International Finance Review

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This paper examines the trend towards regionalism upon stock market returns for a sample of Asian countries. We find that stock markets are becoming regionally integrated at a faster rate than globally. This finding reflects the growing co-operation between Asian countries. This study focuses upon Indonesia, Malaysia, the Philippines, South Korea, Taiwan and Thailand. These markets suffered severe contagion effects in relation to the Asian financial crisis that occurred during 1997. In addition, this study reports on the significant economic and political events that occurred in Asian economies from 1980. This study concludes that increases in liberalization coupled with stronger 'regionalism' in South East Asia contributed to the Asian financial crisis in 1997, in addition the structural weaknesses in their financial systems. Policy setters may consider reducing the amount of intra-regional dependence in order to reduce the impact of financial crises and improve stability of the financial system and re-examine the correct sequencing of both economic and financial liberalization.

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Regional integration in East Asia. From market-driven regionalisation to institutionalised regionalism?

Cited by 15 publications

References 20 publications

Integration between East and Southeast Asian equity markets

Integration between East and Southeast Asian equity markets

Inter‐country trade patterns in europe and the asia‐pacific: regional structure and extra‐regional trends

The impact of liberalization and regionalism upon capital markets in emerging Asian economies

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