The Evolution of Asian Financial Linkages: Key Determinants and the Role of Policy

By Selim A Elekdag, Phurichai Rungcharoenkitkul, Yiqun Wu

November 1, 2012

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Selim A Elekdag, Phurichai Rungcharoenkitkul, and Yiqun Wu. The Evolution of Asian Financial Linkages: Key Determinants and the Role of Policy, (USA: International Monetary Fund, 2012) accessed December 24, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

This paper examines how Asian financial linkages with systemic economies have changed over time. After developing a factor model, it estimates Asian financial sensitivities to systemic economies, and then seeks to uncover their key determinants, which include trade and financial linkages, as well as policies. In line with Asia’s growing role in the global economy—including through deeper financial integration—regional financial markets have become more sensitive to systemic economies. Asian financial sensitivities to systemic economies exhibit cyclical fluctuations, and reached historically high levels during the latest global financial crisis of 2008–09. While macroeconomic policy frameworks have helped Asian economies cope well with market turbulence, they cannot completely insulate Asian financial markets against major global financial shocks.

Subject: Balance of payments, Banking, Exchange rate arrangements, Financial institutions, Financial markets, Foreign direct investment, Foreign exchange, National accounts, Return on investment, Stock markets, Stocks

Keywords: Asia, Asia and Pacific, Beta, Economy c, Exchange rate arrangements, Financial linkages, Financial market spillover, Foreign direct investment, GDP ×, Global, Global financial crisis, Market portfolio return, Return on investment, Risk premium, Stock markets, Stocks, Systemic economy, WP

Publication Details

Pages:

27
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2012/262
Stock No:

WPIEA2012262
ISBN:

9781475588682
ISSN:

1018-5941

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