Abstract
Financial integration in Asia is assessed in this paper by examining the time-series stochastic behavior and cointegration in a set of five Asian currencies, the Japanese Yen (JY), Hong Kong Dollar (HK), Malaysian Ringgit (MR), Philippines Peso (PP), and the Singapore Dollar (SD), for the last eight years of the decade of the 1980s. Significant non-stationarity, deviations from normality, and the presence of unit roots were documented for each currency. Furthermore, in contrast to the findings for developed country liquid currencies, these five currencies were found to be cointegrated. These findings have important implications for understanding the expanding international role of the Japanese Yen and the nature of international financial integration in Asia as well as for developing hedging strategies for investments and cash flows denominated in these Southeast Asian currencies.
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