Asian Financial Integration Research Articles

Common stochastic trends among Asian currencies: Evidence for Japan, ASEANs, and the Asian tigers

This study documents that daily changes in Asian exchange rates are significantly non-normal, serially correlated, non-stationary, and have unit roots. Further, accounting for these time series properties and using a longer time horizon than other similar studies of exchange rates, this study also documents cointegration between the Japanese Yen and two sets of Asian currencies, i.e., currencies of the 'Tigers', Hong Kong, South Korea, Singapore, and Taiwan; and currencies of the ASEANs, Malaysia, Philippines, Thailand, and Singapore. These findings of cointegration among Asian exchange rates are in contrast to the findings for the major currencies, and are evidence of nascent Yen blocs in Asia. The results presented here have important implications for understanding Asian financial integration and the international role of the Japanese yen and should be useful for developing asset allocation, currency overlay, value at risk (VAR), and hedging strategies for investments in these often illiquid Asian currencies.

Cointegration among Asian currencies: Evidence of the increasing influence of the Japanese yen

This is a study of the stochastic properties of Asian exchange rates and of cointegration between the Japanese yen and two sets of Asian currencies, i.e., currencies of the ‘Tigers’, Hong Kong, South Korea, Singapore, and Taiwan; and currencies of the ASEANs, Malaysia, Philippines, Thailand, and Singapore. Using a longer time horizon than other cointegration studies and accounting for deviations from normality, non-stationarity, and the presence of unit roots, it is documented that (in contrast to the findings for the major currencies) both sets of Asian currencies are found to be cointegrated, with the influence of the Japanese yen increasing relative to the US dollar in recent years. This evidence of cointegration between the Yen and other Asian currencies has important implications for understanding Asian financial integration, the increasing international role of the Japanese yen, and for developing asset allocation and crosshedging strategies for investments denominated in these Asian currencies.

Cointegration among Southeast Asian and Japanese currencies: Preliminary evidence of a Yen bloc?

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.