Measuring Financial and Economic Integration with Equity Prices in Emerging Markets

53 Pages Posted: 20 Jun 2002  

Fabiola Ravazzolo

City University London

Kate Phylaktis

Cass Business School, City University, London

Date Written: 2002

Abstract

This paper examines real and financial links simultaneously at the regional and global level for a group of Pacific-Basin countries by analysing the covariance of excess returns on national stock markets over the period 1980-1998. We find overwhelming evidence at the regional and global level and for all sub-periods that financial integration is accompanied by economic integration. This seems to suggest that economic integration provides a channel for financial integration, which explains, at least partly, the high degree of financial integration found in this study and in other studies for this region even in the presence of foreign exchange controls. This result has important implications for the use of restrictions to isolate capital markets from world influences.

Keywords: Capital market integration; emerging markets; and Pacific-Basin capital markets

JEL Classification: F36, G15

Suggested Citation

Ravazzolo, Fabiola and Phylaktis, Kate, Measuring Financial and Economic Integration with Equity Prices in Emerging Markets (2002). EFMA 2002 London Meetings; Cass Business School Research Paper. Available at SSRN: https://ssrn.com/abstract=314833 or http://dx.doi.org/10.2139/ssrn.314833

Fabiola Ravazzolo

City University London ( email )

Frobisher Crescent
Barbican Centre
London, EC1V OHB
United Kingdom
(44) 171 477 8881 (Fax)

Kate Phylaktis (Contact Author)

Cass Business School, City University, London ( email )

106 Bunhill Row
London, EC1Y 8TZ
United Kingdom
+44 20 70408735 (Phone)
+44 20 70408881 (Fax)

HOME PAGE: http://www.cass.city.ac.uk/faculty/k.phylaktis/

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