Paskaa Essay

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Research in International Business and Finance 23 (2009) 90–106 Contents lists available at ScienceDirect Research in International Business and Finance j o ur na l ho me pa ge : w w w . e l s e v i e r . c o m / l o c a t e / r i b a f International financial integration in Asian bond markets Xuan Vinh Vo ∗ School of Economics, University of New South Wales, NSW 2052, Australia a r t i c l e i n f o a b s t r a c t With the development of international financial market, the degree of international financial integration increased significantly during the late 1980s and 1990s. A key factor underlying this process was the increased globalization of investments seeking a higher rate of return and the opportunity to diversify risk internationally. In this paper, we investigate the degree of international financial integration in Asia by examining the relationships amongst Asian bond markets by employing the advanced econometric technique of cointegration of error correction vectors. In other words, we propose the answers to the following questions. Firstly, what is the degree of international financial integration in Asian bond markets? Secondly, does this degree of integration significantly change after the 1997 Asian financial crisis? This study has a strong implication for investors, in particular, from the perspective of Australian or US investors, whether they do benefit from investing in Asian bond markets. In addition, understanding the extent of financial integration and monitoring its progress in the region is important for Asian central banks. In addition, increased international financial integration promotes financial development and hence enhances economic performance in the region. © 2008 Elsevier B.V. All rights reserved. Article history: Received 5 March 2007 Received in revised form 3 June 2008 Accepted 9 July 2008 Available online 17 July

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