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The Evolution of Asian Financial Linkages: Key Determinants and the Role of Policy
Author: Mr. Selim A Elekdaghttps://orcid.org/0000-0002-1234-4463, Mr. Phurichai Rungcharoenkitkul, and Mr. Yiqun Wu
Series:
IMF Working Papers
Volume/Issue:
Volume 2012: Issue 262
Language:
English
Publication Date:
01 Nov 2012
DOI:
https://doi.org/10.5089/9781475588682.001
ISBN:
9781475588682
ISSN:
1018-5941
Pages:
27
Keywords:
WP; financial linkages; Asia; beta; global financial crisis; systemic economy; economy c; GDP ×; risk premium; market portfolio return; financial market spillover; Stock markets; Exchange rate arrangements; Foreign direct investment; Stocks; Return on investment; Global; Asia and Pacific
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IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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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. 
Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund