Financial Market Integration in Pakistan

African Journal of Business Management, Vol. 6, No. 2, pp. 608-614, 2012

7 Pages Posted: 10 Feb 2012

See all articles by Sulaiman D. Muhammad

Sulaiman D. Muhammad

Federal Urdu University of Arts Science & Technology

Adnan Hussain

Benazir Bhutto Shaheed University, Lyari, Karachi; University of Karachi - Applied Economics Research Centre

Syed Iqbal Hussain Naqvi

affiliation not provided to SSRN

Saba Zehra

affiliation not provided to SSRN

Date Written: January 18, 2012

Abstract

This research evaluates the issue of financial integration with reference to financial market of Pakistan; subsequent to liberalization (1991) capital flows rapidly growing due to openness reforms. This openness reforms specifically increased capital flow in short run in domestic market. It is imperative to explore causes pertaining to this issue to obtain positive impact with growing sustainable financial markets. For this purpose, monthly data of Karachi interbank offer rate (KIBOR), 3 months treasury bills rate, Pakistani rupee/US dollar exchange rate, stock prices (Karachi Stock Exchange 100 index) and the London Interbank offer rate (LIBOR) were used. Applying Johnson co integration technique, it is found that there is a long run correlation among local foreign exchange market and LIBOR but this relationship is not robust due to high control of State Bank of Pakistan (SBP). Securities market is still found at the developing stage and not fully integrated with international financial market. It is suggested that further steps and initiatives be taken to increase international financial integration in securities market. This may be very helpful to reduce arbitrage and speculation in financial market in Pakistan.

Keywords: financial integration, co-integration, market

Suggested Citation

Muhammad, Sulaiman D. and Hussain, Adnan and Naqvi, Syed Iqbal Hussain and Zehra, Saba, Financial Market Integration in Pakistan (January 18, 2012). African Journal of Business Management, Vol. 6, No. 2, pp. 608-614, 2012, Available at SSRN: https://ssrn.com/abstract=2002481

Sulaiman D. Muhammad (Contact Author)

Federal Urdu University of Arts Science & Technology ( email )

Sector G-7/1, Main University Road
Gulshan-e-Iqbal
Karachi, Sindh 744000
Pakistan

Adnan Hussain

Benazir Bhutto Shaheed University, Lyari, Karachi ( email )

Faqir Mohammad Dura Khan Road,
Near cheel chowk
Karachi, Sindh 75500
Pakistan

HOME PAGE: http://www.bbsul.edu.pk

University of Karachi - Applied Economics Research Centre ( email )

Mail University Road
Karachi University
Karachi, SC Sind 75270
Pakistan

Syed Iqbal Hussain Naqvi

affiliation not provided to SSRN

No Address Available

Saba Zehra

affiliation not provided to SSRN

No Address Available

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