Publication:
Financial integration and international capital mobility: evidence from ASEAN
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Date
2012
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Abstract
This study was conducted to explore the linkages between savings and investment and to further test whether there is any evidence of relationship between financial integration and international capital mobility. The empirical model to test the capital mobility hypothesis applied here employs the panel data approach to the basic regression model used by Feldstein & Horioka (1980). The study covers ASEAN5 and ASEAN+3 (with China, Korea and Japan included). The findings of this study corroborate with other studies that savings and investment are cointegrated and this can be interpreted as a manifestation of the inter-temporal budget constraint rather than evidence of low capital mobility. The long-run equilibrium between savings and investment is in line with the inter-temporal budget constraints of an open economy as current account deficits cannot be sustained indefinitely. The relatively high degree of capital mobility when China, Korea and Japan are included in the ASEAN5 sample suggests that there is great potential for integration in the financial markets in these eight economies in the future
Keywords
ASEAN , Savings , Investment , Cointegration , Financial integration
Citation
Habibullah, M. S., Kumari, S., & Abdul Hamid, B. (2012). Financial integration and international capital mobility: evidence from ASEAN. Taylor Business Review, 2(1), pp. 17-31.
Publisher
Taylor's University