Real and Financial Integration in East Asia

18 Pages Posted: 19 Apr 2012

See all articles by Soyoung Kim

Soyoung Kim

Seoul National University

Jong‐Wha Lee

Korea University

Date Written: May 2012


This paper examines the real and financial integration of East Asian economies, by comparing the degree of real vs financial and global vs regional integration, before vs after the Asian crisis. First, price and quantity measures such as the size of intra‐ and inter‐regional trade, cross‐border financial assets, stock return correlation, and interest rate differentials are investigated. Second, the structural panel vector autoregression (VAR) model is constructed to analyze macroeconomic consequences of real and financial integration such as cross‐country output and consumption relation. The results suggest that (i) the degree of real integration significantly increased after the crisis, both regionally and globally; (iii) quantity and price measures showed an increased financial integration after the crisis, but the consumption relation did not; (iv) the degree of regional financial integration is smaller than that of global financial integration, based on the consumption relation; and (v) financial integration lags real integration, especially for regional integration.

Suggested Citation

Kim, Soyoung and Lee, Jong‐Wha, Real and Financial Integration in East Asia (May 2012). Review of International Economics, Vol. 20, Issue 2, pp. 332-349, 2012, Available at SSRN: or

Soyoung Kim

Seoul National University ( email )

Seoul, 151-742
Korea, Republic of (South Korea)
+82-2-880- 2689 (Phone)

Jong‐Wha Lee

Korea University

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