Dynamic Financial Market Integration: A Path to Sustainable Growth

Rangga Handika

doi:10.29313/mimbar.v37i2.8021

Dynamic Financial Market Integration: A Path to Sustainable Growth

Rangga Handika

Abstract

This paper examines the integration between Indonesia and Asia-AustraliaEurope-US stock markets. Specifically, this article investigates whether there is a dynamic integration in Indonesia’s financial markets to the global. The author uses correlation and regression methods to explore dynamic integration. The author also uses an additive regression method for robustness check. Overall, the author finds that there is a dynamic integration in Indonesia’s financial market. Indonesia’s financial market has become more globally integrated over the last two decades. The author concludes that there are sustainable growth opportunities along with the integration of Indonesia’s and global financial markets.

Keywords

integration, markets, growth

Full Text:

PDF

References

Aït-Sahalia, Y. and Lo, A. W. (1998). Nonparametric estimation of state-price densities implicit in financial asset prices, The Journal of Finance, Vol. 53, No. 2, pp. 499-547.

Bekaert, G., Harvey, C. R. and Lundblad, C. (2005). Does financial liberalization spur growth?, Journal of Financial Economics, Vol. 77, No. 1, pp. 3-55.

Bekaert, G., Harvey, C. R., Lundblad, C. and Siegel, S. (2007). Global growth opportunities and market integration, The Journal of Finance, Vol. 62, No. 3, pp. 1081-1137.

Boguth, O., Carlson, M., Fisher, A., and Simutin, M. (2016). Horizon effects in average returns: The role of slow information diffusion, The Review of Financial Studies, Vol. 29, No. 8, pp. 2241-2281.

Ciner, C. (2018). Does the stock market contain information about economic growth? Time-varying out of sample causality tests, Applied Economics Letters, Vol. 26, No. 13, https://doi.org/1 0.1080/13504851.2018.1540834.

Das, D., Kannadhasan, M. and Bhattacharyya, M. (2019). Do the emerging stock markets react to international economic policy uncertainty, geopolitical risk, and financial stress alike?, The North American Journal of Economics and Finance, No. 48, pp. 1-19.

Dumas, B. and Uppal, R. (2001). Global diversification, growth, and welfare with imperfectly integrated markets for goods, The Review Financial Studies, Vol. 14, No. 1, pp. 277-305.

Engle, R. F., and Ng, V. K. (1993). Measuring and testing the impact of news on volatility, The Journal of Finance, Vol. 48, No. 5, pp. 1749-1778.

Fan, J., and Wang, Y. (2007). Multi-scale jump and volatility analysis for highfrequency financial data, Journal of the American Statistical Association, Vol. 102, pp. 1349-1362.

Faraway, J. J. (2016). Extending the linear model with R: Generalized linear, mixed effects and nonparametric regression models 2nd edition, CRC Press, USA.

Gallinger, G. W. (1994). Causality tests of the real stock return-real activity hypothesis, The Journal of Financial Research, Vol. 17, No. 2, pp. 271-288.

Huang, W. Q., and Dan, W. (2020). Financial network linkages to predict economic output, Finance Research Letters, Vol. 33, https://www.sciencedirect.com/science/ article/abs/pii/S1544612319301746.

Kleimeier, S. and Versteeg, R. (2010). Project finance as a driver of economic growth in low‐income countries, Review of Financial Economics, Vol. 19, No. 2, pp. 49-59.

Klemelä, J. (2014). Multivariate nonparametric regression and visualization: With R and applications to finance, Wiley, USA.

Levine, R. and Zervos, S. (1996). Stock market development and long-run growth, The World Bank Economic Review, Vol. 10, No. 2, pp. 323-339.

Levine, R. and Zervos, S. (1998). Stock markets, banks, and economic growth, The American Economic Review, Vol. 88, No. 3, pp. 537-558.

Li, F. and Zhu, H. (2014). Testing for financial contagion based on a nonparametric measure of the cross-market correlation, Review of Financial Economics, Vol. 23, No. 3, pp. 141-147.

Nasreen, S., Mahalik, M. K., Shahbaz, M. and Abbas, Q. (2020). How do financial globalization, institutions, and economic growth impact financial sector development in European countries?, Research in International Business and Finance, Vol. 54, https://www. sciencedirect.com/science/article/abs/ pii/S0275531919303605.

Thornton, D. L., and Valente, G. (2012). Outof-sample predictions of bond excess returns and forward rates: An asset allocation perspective, The Review of Financial Studies, Vol. 25, No. 10, pp. 3141-3168.

Selvarajan, S. K. and Ab-Rahim, S. (2020). Financial integration and economic growth: Should Asia emulate Europe?, Journal of Economic Integration, Vol. 35, No. 1, pp. 191-213.

Stone, C. J. (1985). Additive regression and other nonparametric models, The Annals of Statistics, Vol. 13, No. 2, pp. 689-705.

Van, L. T. H., Vo, A. T., Nguyen, N. T. and Vo, D. H. (2019). Financial inclusion and economic growth: An international evidence, Emerging Markets Finance, and Trade, https://doi.org/10.1080/154049 6X.2019.1697672.

Yahoo Finance. (2020). https://finance. yahoo.com/, viewed August 30, 2020.

DOI: https://doi.org/10.29313/mimbar.v37i2.8021

Refbacks

There are currently no refbacks.

MIMBAR : Jurnal Sosial dan Pembangunan is licensed under Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International License.