Regional Financial Integration Research Articles

Economic integration processes in East Asia - results, opportunities and challenges

The East Asian region is a major global economic player, given its economic size and potential. As such, regional economic integration of East Asia could be considered as an important building bloc towards integration of the Asia Pacific region. East Asia has made significant progress in creating institutions for closer cooperation and integration. East Asian regional production networks are the most integrated in the world, and regional financial initiatives have taken off. Gripped by this wave of regionalism, the East Asian economies have expedited further liberalization process and have started unmarked trade liberalization strategies, enhanced economic cooperation, and negotiating on currency un-ion. Since 1997, East Asian regionalism seems to have progressed and an East Asian Community is just around the corner. This paper is a study which presents the realities that East Asian regionalism is still lap-sided: economic regionalism is highly developed, while other key components (regional financial integration, education collaboration, and a regional political framework) are developing at a slower rate, stagnating, and/or regressing. It aims to present the reality of East Asian regionalism, provoke awareness of false perspectives, and present a recommendation towards a balanced and more sustainable East Asian integration.

Integration of Financial Capability and The Economy of North Sumatra (Panel Regression Model)

The district or province's financial capacity to integrate with the economy. The greater the contribution to the economic progress of North Sumatra. The research establishes regional financial integration (Local Revenue, asset spending, and General Allocation Fund) on North Sumatra's economic ability to develop development potential. The data analysis method uses panel data. The research results found that Local Revenue, asset spending, and General Allocation Funds simultaneously or together had an effect on the economy. Local Revenue and asset spending have a partial effect on the economy. The General Allocation Fund has no partial effect on the economy.

Reducing Capital Flight in Africa: Does Regional Financial Integration Matter?

Capital flight continues to be an issue of paramount importance for developing economies, as it deprives them of the funds required for economic takeoff. Hence, this paper aims to analyze the effect of regional financial integration (RFI) on capital flight in Africa. Based on a sample of 23 countries, we specify and estimate an asset demand model of capital flight using a portfolio choice analysis by the system-generalized method of moments for the period 1996-2015. We find two important results. First, the RFI reduces capital flight. This result becomes even more interesting when the quality of governance is considered. Second, structural breaks in the RFI-capital flight relationship explain why the RFI has had a mixed effect on the capital flight over the study period. We recommend that the attractiveness of regional financial services be enhanced concurrently with the standardization of banking and financial regulation in Africa.

The Asian Clearing Union: Promoting Regional Financial Integration and Economic Cooperation

The Asian Clearing Union: Promoting Regional Financial Integration and Economic Cooperation

Regional financial integration, financial development and industrial sector growth in ECOWAS: Does institution matter?

Regional economies seek to promote growth through industrialisation and literature suggests that developing the financial system, integrating the financial system within a sound institutional framework can promote industrial output. This study fills the gap by examining the impact of financial development and regional financial integration on ECOWAS’ industrial sector. This study assesses whether regional financial integration and financial development have a stronger effect on the growth of the industrial sector of ECOWAS member countries that have high level of institutional quality than it does in countries with lower level. Major findings from the study reveals that deepening regional financial integration can only enhance the industrial output of ECOWAS member countries that has sound institutional quality framework; this is important and is a strong enhancing factor for member countries experiencing low industrial sector output. Credit to the private sector alone both for countries with low industrial output and countries with high industrial output does not improve the level of industrial performance. However, for countries that have low industrial output with a stronger institutional quality framework, increases in credit to the private sector will increase the level of industrial output compared to countries with a higher level of industrial output. Increasing the level of money in circulation alone does not improve industrial sector performance; the quantum channeled as credit to the private sector does. An improved institutional framework must be set in place together with an enhanced flow of credit to the private sector in ECOWAS.

Does Integration of Information System Technology Influence Good Governance Implementation in Public Service in Regional Government?

The purpose of this study was to determine the effect of the regional financial information system integration process on Regional Government Information System (SIPD) which was launched by the Ministry of Home Affairs. The sampling technique used was purposive sampling with 30 respondents who were directly involved and experts in the process of integrating the SIPD financial information system. Data processing is done by quantitative descriptive method with multiple linear regression analysis. The analysis results is shows that the analysis variables to determine the effect on the implementation of good governance are external support units, the level of system accuracy, as well as the effectiveness and efficiency of the application of information technology systems to support the implementation of good governance in local governments, especially in the Regional Finance and Assets Agency (BKAD) shows 69,9 percent of the variables explained the influence in the implementation of good governance. The effectiveness and efficiency variables have a significant-positive effect on the implementation of good governance. Technology is a means of increasing effectiveness and efficiency in the application of governance processes and the readiness of human resources is also one of the supporters of accelerated integration.

Mobile money and regional financial integration: Evidence from sub-Saharan Africa

Orientation: The article examines the impact of mobile money adoption and regional financial integration in sub-Saharan Africa.Research purpose: The study sought to uncover the relationship between mobile money adoption and cross-border remittances as a de facto measure of regional integration.Motivation for the study: The extent to which differences in mobile money penetration rates across sub-Saharan Africa influence cross-border remittances remains a grey area that necessitates empirical investigation.Research approach, design and method: A quantitative research method was adopted and the study examined aggregated quarterly data obtained from 41 countries making up the four regions of sub-Saharan Africa. The study applied the dynamic ordinary least squares and fully modified ordinary least squares approaches as the estimation techniques.Main findings: Mobile money adoption has positively impacted cross-border remittances and improved de facto regional financial links in sub-Saharan Africa. The study’s findings also support the view that better governance through control of corruption and political stability removes dependence on remittances.Practical/managerial implications: There is a need to integrate mobile money and other cross-border remittance platforms to improve access to financial services for migrants and harness their savings into the mainstream economy.Contributions/value-add: The study adds to the body of knowledge by showing that higher mobile money penetration rates have regional integration benefits.

Global and Regional Financial Integration in Emerging Asia: Evidence from Stock Markets

This paper employs a price-based measure of integration, namely stock return differentials between ten emerging Asian economies and the US (as an indicator of global integration), as well as Japan and the Asian region (as two alternative indicators of regional integration), to test for mean reversion and draw inference on financial integration. It makes a three-fold contribution: it uses not only aggregate but also industry level data on stock returns; it examines the impact of the 2008 crisis; it employs a fractional integration approach to investigate the issues of interest. The evidence suggests that in emerging Asia there is more regional than global integration, and that the former has become even stronger in the post-2008 crisis period.

Interdependence among West African stock markets: A dimension of regional financial integration

AbstractUnderstanding the nature of interdependence between international stock markets is vital for portfolio diversification, risk management and market regulation. This paper examines the nature of interdependence among West African stock markets using correlation analysis, the Granger causality test and a multivariate BEKK‐GARCH (1,1) model. The results show evidence of a weak relationship among West African stock markets. The results also show absence of causal dependence between the Côte d'Ivoire BRVM (Bourse Régionale des Valeurs Mobilières), and the Ghana stock market, but evince feedback relationship between the Côte d'Ivoire BRVM and the Nigeria stock market as well as between the Ghana and Nigeria stock markets. The results further reveal no evidence of volatility spillover between the Côte d'Ivoire BRVM and the Ghana stock market, but show evidence of unidirectional volatility spillover from the Nigeria stock market to the Côte d'Ivoire BRVM as well as bidirectional volatility spillover between the Nigerian and Ghanaian stock markets. Overall, the findings reveal existence of weak interdependence among West African stock markets, and that West African financial markets are interdependent through the Nigerian market. These findings are relevant to stock market stabilisation and investment policy in West Africa.

The Impact of Belt and Road Initiative on Regional Financial Integration – Empirical Evidence from Bond and Money Markets in Belt and Road Countries

Belt and Road Initiative (BRI) proposed in 2013 has received wide research attention in recent years. However, rigorous quantitative studies on BRI’s impact on regional financial integration are scarce. This paper contributes to filling this research gap by adopting Adam et al. beta convergence and sigma convergence method. Two processes of financial integration are of primarily concern i.e. intraregional integration and the integration with the Chinese markets. Four regions are specifically investigated: Central and East Europe, Southeast Asia, Common Wealth Independent States and Africa. The findings indicate that: (1) BRI mainly influences the tendency of financial integration while the degree of integration was merely influenced. (2) Integration process in bond and money markets behave differently toward BRI with the tendency of bond market integration being stronger. (3) Four regions exhibited ununiformed response to BRI in terms of financial integration. This paper also discussed BRI and the values it brings to incorporate financial integration and sustainable development practices to the BRI regions. Examples of BRI projects prove the importance of BRI and regional sustainable economic development. To enhance the sustainability of BRI projects, this paper recommends further studies to examine the dynamics and interlinked relationships of the BRI regions.

Comments on A Framework for Regional Banking Regulation in ASEAN

October 01 2020 Comments on A Framework for Regional Banking Regulation in ASEAN Author and Article Information Online Issn: 1536-0083 Print Issn: 1535-3516 © 2020 by the Asian Economic Panel and the Massachusetts Institute of Technology2020Asian Economic Panel and the Massachusetts Institute of Technology Asian Economic Papers (2020) 19 (3): 126–127. https://doi.org/10.1162/asep_a_00793 Cite Icon Cite Permissions Share Icon Share Twitter LinkedIn Views Icon Views Article contents Figures & tables Video Audio Supplementary Data Peer Review Search Site Citation Comments on A Framework for Regional Banking Regulation in ASEAN. Asian Economic Papers 2020; 19 (3): 126–127. doi: https://doi.org/10.1162/asep_a_00793 Download citation file: Ris (Zotero) Reference Manager EasyBib Bookends Mendeley Papers EndNote RefWorks BibTex toolbar search Search Dropdown Menu nav search search input Search input auto suggest search filter All ContentAll JournalsAsian Economic Papers Search Advanced Search Miaojie Yu, Peking University: This paper analyzes ASEAN banking regulation by applying the supervisory and regulatory framework of the European Union, which has a more advanced integrated financial system. The comparison focuses on four issues---microprudential regulation, macroprudential regulation, resolution capacity and deposit insurance, and financial safety net for liquidity support---and comes up with detailed recommendations for each issue that are innovative and practical. For example, one suggestion is that the ASEAN+3 Macroeconomic Research Office (AMRO) could perform the same functions of the EU Financial Stability Board in coordinating each national supervisory agency, and being a focal point for integrated supervision. To be specific, this paper adds value to the literature on regional financial integration and regulation in four major dimensions. It extends the literature by covering developing countries that have less-developed financial markets and legislation systems than the EU. Both EU and ASEAN are usefully compared on the four aspects... You do not currently have access to this content.

Comments on A Framework for Regional Banking Regulation in ASEAN

Comments on A Framework for Regional Banking Regulation in ASEAN

Business cycles, bilateral trade and financial integration: Evidence from Economic Community of West African States (ECOWAS)

This paper identifies the determinants of synchronization of business cycles in ECOWAS, which is a key issue from the perspective of creating a single currency in 2020. Indeed, conducting actions in the direction of synchronization of business cycles is important because the asymmetries of cycles observed within a monetary union determine its sustainability. We go further than previous studies in this area, as we (i) take into account financial linkages, (ii) propose new measures to improve the quality of results, and (iii) pay attention to the structure of trade by analyzing inter-regional links. Moreover, to highlight the role of adopting a single currency in ECOWAS, we compare the West African Economic and Monetary Union and the non-monetary zone within the ECOWAS zone. We find that bilateral trade and financial integration are determinants of the synchronization of business cycles in the region, with the regional financial integration channel dominating the international one. Finally, we show that the weakness of intracommunity trade does not constitute a barrier to the monetary union, and that the launch of the single currency is a means to increase business cycles synchronization through bilateral trade.

Business Cycles, Bilateral Trade and Financial Integration: Evidence From Economic Community of West African States (ECOWAS)

This paper identifies the determinants of synchronization of business cycles in ECOWAS because it allows decision-makers to better target their economic policies. It is relevant given the willingness of ECOWAS heads of state to create a single currency in 2020. Indeed, conducting actions in the direction of the synchronization of business cycles is important because the asymmetries of cycles observed within monetary union determine its sustainability. Unlike previous studies in this area, it is innovative as it takes into account financial linkages. In addition, it proposes new measures to increase the quality of results. Moreover, this paper takes into account the structure of trade by analyzing inter-regional links. Finally, in order to highlight the role of single currency in ECOWAS, it compares West African Economic and Monetary Union and the non-monetary zone within ECOWAS zone. We find that bilateral trade and financial integration are determinants of the synchronization of business cycles in the region. However, we find that regional financial integration channel dominates international financial integration channel. In addition, we find that the weakness of intracommunity trade doesn’t constitute a barrier to monetary union. Finally we find that single currency increases the synchronization of business cycles through bilateral trade.

Regional financial integration and its impact on banking development: Evidence from Southern African Development Community countries

AbstractThe study investigated the impact of regional financial integration on banking sector development with specific focus on the impact of the Southern African Development Community protocols on trade and finance and investment. A total of 14 countries made up the study sample, and the panel cointegration fully modified ordinary least squares model (FMOLS) alongside the generalized method of moments (GMM) were used to estimate the nature of the impact. Study findings showed that regional integration through the protocol on trade had a positive and significant impact on size and efficiency of the banking sector using the FMOLS estimator. GMM estimations for the same variables were largely insignificant. Study findings also pointed to an improvement in global financial integration indicators as a result of the trade protocol, which in turn also contributed to an increase in the level of monetization of regional financial markets. The finance and investment protocol had a positive and significant impact on private sector credit for both estimators and largely insignificant relationship with broad money. The study also observed the complimentary relationship between institutional quality and social capital in the financial development process indicating the importance of policies that strengthen sound legal systems, protect property rights, and enhance the rule of law.

Китай и Япония в процессе финансовой интеграции в Азии

The article discusses the main areas and features of China and Japan participation in the process of financial integration. A comparative analysis of the possibilities of interaction with Asian countries in the credit and securities markets has been carried out. A special place is given to China and Japan activities in regional financial organizations and associations. It is argued that sphere of regional financial integration is one of the areas of economic cooperation between the two countries where along with the trends towards cooperation there is also a process of increasing competition. Improving the quality of bilateral economic ties between China and Japan and the establishment of multilateral cooperation is not accompanied by a general restructuring of competitive relations in the region. A number of areas of economic activity remain in the sphere of competition which continues to increase both at the state and corporations and banks levels. China uses innovative aid technologies to create the Asian Infrastructure Investment Bank, eliminate existing bottlenecks, and acquire strategic assets in the region. Japan, despite strained relations with a number of Asian countries, continues to integrate into the regional economy through a network of production and logistics chains and is still a major source of capital for many Asian countries. All this suggests that, despite China's undoubted economic and financial success, it needs time to secure its leadership in the region. At the same time, the further deterioration of trade and economic relations between China and the United States, the consequences of the coronavirus crisis push China to more cooperation with Japan in stock, banking and currency areas, through regional economic organizations, and further expansion of the use of local currencies, primarily yen and renminbi, instead of dollars for investment and expansion of multilateral settlement and payment transactions in the region.

Финансовая интеграция стран Азии: региональный аспект

The Asian crisis of 1997 and the global financial and economic crisis of 2008–2009 put under question a number of positive aspects of global financial integration. The integration of international capital markets was the driving force behind the growth of financial innovations and contributed to the expansion of international trade in goods and services. However, it failed to provide a fully efficient allocation of resources among developing countries and proved to be a sources of risk to them. In this regard, although Asian markets continue to maintain a higher degree of integration with global markets, primarily G7 countries, another form of financial interaction develops – regional integration as the stock and banking markets develop in Asia. The issues of financial integration in Asia are increasingly coming to the same level with other types of integration – trade, production, labor. The implementation of regional integration in the monetary area is also aimed at increasing the payment turnover in local currencies in order to reduce the dependence on the dominance of financing in the American and European currencies. This process is ambiguous, when analyzing the main directions of financial integration of Asia in various segments of the financial market, it is revealed that with the value expansion of intra-regional assets and liabilities, there is a reduction in the regional share of portfolio investments, while the share of direct investments and bank financing increases. Considering the prospects for intraregional expansion of financial interaction in the process of forming a new financial architecture in Asia and closer participation of the largest countries of the region in it, the author believes that regional financial integration can be one of the ways to overcome the disadvantages of global financial integration, allowing developing Asian economies to use local financial resources in the region, as an alternative to part of the global financial market. However, weak development of the institutional framework, especially due to the predominant role of trade relations in the region, seriously hinder the process of transition to the creation of a developed financial structure of cooperation by analogy with the European Union, which is considered as a basic model.

East Asia–Regional or Global Financial Integration?

The article considers the main directions of further financial integration of East Asian countries, developing deep and stable connections within the framework of global and regional economy. Currently, among the investment flows that lay ground for financial integration with other regions, the leading place is taken by funds from and to the countries of North America and Western Europe. At the same time, the growth in intraregional investment, especially in terms of assets, significantly exceeds growth from the group of developed countries, the share of participation of the latter in interregional relations is gradually decreasing. Through the development of regional integration at various levels of economic interaction, Asian countries are seeking ways to reduce vulnerability and contagion from the processes of financial globalization. While the trends in regional financial integration have certain advantages, they also involve some risks. On the one hand, the Asian region can benefit from greater financial diversification and reduce the concentration and dependence from western economies. On the other hand, this process can bring imported volatility from other countries of the region and reduce the regulatory counteraction from various types of shocks that arise in the economies of these countries and beyond. The intensity of further convergence of the financial markets and institutional arrangements of Asian countries will be largely determined by the scenarios of development of the world economy, as its slowdown and, consequently, decrease of activity in the global capital market clearly leads to strengthening of regional integration processes. The expansion of intraregional cross-border financial transactions requires a significant expansion of the regulatory framework for cooperation, the conclusion of two-and multilateral banking and investment agreements, as they directly determine the process of capital flows liberalization. As regional financial cooperation in Asia has not yet developed as in Western Europe and North America, it is important to pay attention to such essential elements as economic and financial supervision, normative harmonization of banking and securities market, strengthening of regional financial security system and maintenance of development of various segment of financial market, first of all bonds in local currency. In the process of work the basic methods of economic analysis were applied, namely basic system and statistical methods. The use of the system approach allowed to consider the movement of capital flows from an to Asia over a long period of time, the evolution of financial integration models. Calculations and comparisons, the construction of tables was carried out on the basis of statistical methods, which are applied for the study of currency and credit relations. The information base of the studies was based on reports and statistics of the World Bank (IBRD), the International Monetary Fund (IMF), the Asian Development Bank, as well as analytical materials of the Institute of World Economy and International Relations of RAS.

Global and regional financial integration in East Asia and the ASEAN

Financial integration is East Asia and the ASEAN nations is investigated using a new approach based on entropy theory. An important advantage of the proposed framework is that it takes into account changes in integration arising from higher order moments including coskewness and cokurtosis as well as more traditional measures based on second order moments. The analysis focusses on the role of the U.S. in understanding changes in global integration over time, as well as changes in regional integration arising from China. Using daily stock returns from 1997 to 2016, the empirical results show an overall trend to improvements in financial integration over time with deviations from the trend occurring during periods of financial crises in Asia in 1997–98, the U.S. in 2007–10 and the recent European debt crisis. The influence of the Chinese economy mainly through its trading linkages is found to be an important determinant of financial integration over time both regionally as well as globally.

Determinants of loan loss provisions of commercial banks in Malaysia

PurposeThis paper aims to derive determinants of loan loss provisions (LLPs) of commercial banks in Malaysia.Design/methodology/approachA single-stage panel data analysis multiple regression model that contains a mixture of quantitative and qualitative elements is used. The LLPs is a dependent variable or regressor, and non-performing loan (NPL), interest income, net profit, loans and advances and gross domestic product (GDP) are the independent variables or regressor/explanatory variables. The moderating variable is “credit risk management” (CRM) and the intervening variable is “relevance and faithful representation”.FindingsThis paper suggests in LLPs, NPLs, interest income, loans and advances, net profit and GDP, as well as the moderating effect of CRM and the intervening effect of relevance and faithful representation, are determinants of the LLPs. The moderating variable CRM strengthens the relationship between the independent variables and the dependent variable. The intervening variable “relevance and faithful representation” brings about a more accurate reporting on the levels of the LLPs.Practical implicationsThe association of the factors is investigated further to detect possible effect of multicollinearity and research to better understand how banks manage their risk as the current investigation is limited to banks in Malaysia.Social implicationsLoan loss provisioning issues of commercial banks in Malaysia are challenges for both regulators and the banking industry owing to the implementation of several new measures, the convergence with internationally accepted accounting standards and differences in loan grading and applications of different loan loss provisioning standards. Because of these challenges, Bank Negara Malaysia (the Central Bank of Malaysia) has tightened its supervision of commercial banks to ensure that banks are sufficiently and adequately provisioned. The banking sector plays a significant role, and it is important that it is resilient in the face of potential sources of systemic risk. And, like in other major ASEAN economies, the Malaysian’s financial system remains largely bank-dominated.Originality/valueThis study discovers whether Malaysian banks are sufficiently provisioned for the regional financial integration under the ASEAN Capital Markets Forum (ACMF) by the end of 2015, where several initiates have been initiated, including the harmonization of standards to encourage greater intra-regional investment flows and transactions and continued provisions of the much needed funds by the region’s private sectors.