Financial Market Integration and Co-Movements Among the Growth Rates: Evidence from South Asian Countries

Posted: 11 May 2011

See all articles by Piyadasa Edirisuriya

Piyadasa Edirisuriya

Monash University; Financial Research Network (FIRN)

Date Written: May 4, 2010


Since the 1980s, South Asian countries have been implementing financial market deregulation policies continuously. Although the process of deregulations has been slow, many countries in the region are heading toward a more integrated market despite current global turmoil. Financial market integration in South Asia could have synchronised economic activities of the countries in the region due to the impact of consolidation. This suggests that when the region’s economies grow/contract, all countries could follow the same path demonstrating a co-movement of growth rates among countries. When economic growth rates are similar for a region, it may be easier to formulate economic policies to achieve a common goal. As the political leadership of South Asia has agreed to work towards forming an economic block similar to that of the European Union and ASIAN, examining co-movement of growth rates could shed more lights on the issue of the success of market integration in the region. The objective of this study is to study market integration by analysing financial markets, trade and economic growth data to spot whether there is any co-movement of growth rates among South Asian countries due to financial market deregulation policies implemented so far. As findings show mix results, we used region’s governance indicators to examine further and found that weak governance is a serious problem in the South Asian region.

Keywords: Finacial market integration, South Asia, Growth rates, Co-movement

JEL Classification: D53, E44, F15, F36

Suggested Citation

Edirisuriya, Piyadasa, Financial Market Integration and Co-Movements Among the Growth Rates: Evidence from South Asian Countries (May 4, 2010). Available at SSRN:

Piyadasa Edirisuriya (Contact Author)

Monash University ( email )

23 Innovation Walk
Wellington Road
Clayton, Victoria 3800

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane


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