Financial Market Integration in East Asia: Status and Options

문우식

ABSTRACT

As cross-border capital movements are expanding, financial markets in East Asia are becoming increasingly integrated. This paper attempts to investigate the current state of financial market integration in East Asia by measuring interest differentials among 10 East Asian countries along with various factors that determine these differentials. According to this paper, there is increasing interest rate convergence in East Asia although the interest deviations remain high compared to Europe. Also, the predominant obstacle preventing further integration is the increasing level of exchange rate fluctuations in East Asia. Given that successful financial market integration necessitates exchange rate stability, it is essential to establish an effective regional monetary institution in East Asia.