Regional Cooperation on the Integration of Asian Financial Markets  Hongzhong Liu Department of International Finance, Fud...
<ul><li>1 .  Introduction </li></ul><ul><li>2. Current State of Financial Cooperation </li></ul><ul><li>3.   Obstacles to ...
<ul><li>Introduction  ----why do we need cooperation? </li></ul><ul><li>A broad consensus that  collective response  is ne...
<ul><li>2. Current State of Financial Cooperation---- at Its Early Stage </li></ul><ul><li>2.1 Financial Regulatory Cooper...
<ul><li>2.1 Financial Regulatory Cooperation (Bilateral & multilateral) </li></ul><ul><li>Bilateral: signing bilateral MOU...
<ul><li>Multilateral : signing  IOSCO MMOU  and some proposals. </li></ul><ul><li>Nine Asian economies have become or have...
<ul><li>2.2 Bond Market Cooperation   </li></ul><ul><li>Asian Bond Markets Initiative (ABMI) ----supply side </li></ul><ul...
<ul><li>ABF: </li></ul><ul><li>ABF1: US$1 billion, investing in U.S. dollar-denominated government and quasi-government bo...
<ul><li>2.3 Stock Market Cooperation ( Bilateral,  </li></ul><ul><li>Multilateral &  Cross Listing)  </li></ul><ul><li>Bil...
<ul><li>SGX-TSE strategic alliance in October 2001  </li></ul><ul><li>ASX-SGX co-trading linkage in December 2001  </li></...
<ul><li>Multilateral Cooperation   </li></ul><ul><li>ASEAN committed to develop an  inter-linked ASEAN securities  market ...
<ul><li>TSE intended to cooperate with stock exchanges of 10 Asian cities in 2002 on the research of constructing a system...
<ul><li>Cross Listing : </li></ul><ul><li>Eighty-one Chinese companies got listed in eight main overseas markets, raising ...
<ul><li>2.4 Derivatives Market Cooperation </li></ul><ul><li>As for foreign exchange trading, derivative trading is concen...
<ul><li>3.  Obstacles to financial integration   </li></ul><ul><li>3.1 Diversity of Member Countries </li></ul><ul><li>3.2...
<ul><li>3.1 Diversity of Member Countries   </li></ul><ul><li>Diversity of  stages of economic development: </li></ul><ul>...
Table 1  Size of  equity markets <ul><li>Source:  Ghosh ( 2006 )   </li></ul>Economy  Bank assets Equity market capitaliza...
Figure 2  Efficiency of equity markets
<ul><li>3.2 Low Financial Openness </li></ul><ul><li>A sizable proportion of shares remain inaccessible to cross-border in...
Table 2  Foreign Participation in the Stock Market (2004) (In percentage point)
Table 3  Freedom Index of Capital Markets Source: Economic Freedom of the World 2006 Annual Report.    1980 1985 1990 1995...
<ul><li>3.3 Lack of Infrastructures   </li></ul><ul><li>Efficiency of Asian financial markets would hinge on well-develope...
<ul><li>3.3 Geopolitical Rivalry   </li></ul><ul><li>The potential rivalry between China and Japan for regional hegemony <...
<ul><li>3.5 Lack of Leading Financial Center Pushing Financial Integration </li></ul><ul><li>Though having three important...
<ul><li>4. Creating conditions for financial market integration   </li></ul><ul><li>4.1 Deepening Economic Integration  </...
<ul><li>4.1 Deepening Economic Integration </li></ul><ul><li>Trade integration and financial integration are closely linke...
<ul><li>4.2 Further Capital Account Liberalization </li></ul><ul><li>Researchers have found that capital account liberaliz...
<ul><li>4.3 Infrastructures Building </li></ul><ul><li>Linking Clearing And Settlement Systems : creating an International...
<ul><li>4.4 Cooperation and Coordination among China, Japan and ASEAN   </li></ul><ul><li>“ hot economics and cold politic...
<ul><li>4.5 Development Strategy of Financial Centers   </li></ul><ul><li>Hong Kong: can attract more Asian companies to b...
<ul><li>5. Possible New Measures for Strengthening Financial Market Cooperation   </li></ul><ul><li>5.1 Financial Regulato...
<ul><li>5.1 Financial Regulatory Cooperation </li></ul><ul><li>Continue the bilateral regulatory cooperation by signing MO...
<ul><li>5.2 Bond Market Cooperation  </li></ul><ul><li>Enhancing the Role of ABMI </li></ul><ul><li>Cultivating the bond m...
<ul><li>5.3 Stock Market Cooperation   </li></ul><ul><li>Cooperation Between Stock Exchanges </li></ul><ul><li>A world tre...
<ul><li>5.3 Derivative Market Cooperation   </li></ul><ul><li>(To be added).  </li></ul>
<ul><li>6. Concluding remarks </li></ul><ul><li>Adopt the  principle of sequencing : The developed markets already started...
References <ul><li>Asian and Pacific Department, IMF. Asia-Pacific Regional Outlook— September 2005. </li></ul><ul><li>Bas...
<ul><li>Eichengreen, Barry. The Parallel Currency Approach to Asian Monetary integration. 2005,  http:// elsa.berkeley.edu...
<ul><li>Ito, Takatoshi. Japan must open up if it is to catch its rivals,  Financial Times , Thursday, May 31, 2007. </li><...
<ul><li>Mori, Junichi. Development of Capital Markets and Surveillance in East Asia with Particular Reference to Bond Mark...
<ul><li>Shang, Fulin Chairman of China Securities Regulatory Commission, P.R.C.. Challenges Related to the Implementation ...
<ul><li>Appendix: Welfare gains from financial market integration   </li></ul><ul><li>Benchmark model  </li></ul><ul><li>D...
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  1. 1. Regional Cooperation on the Integration of Asian Financial Markets Hongzhong Liu Department of International Finance, Fudan University [email_address] . Haiqing Zheng Department of Finance, East China Normal University [email_address] July 20,2007 The first draft for the “Emerging Asian Regionalism: Ten Years After the Crisis” Technical Workshop on 19-20 July, 2007, Bangkok, Thailand. We are grateful to Prof. Peter Petri, Giovanni Capannelli and Jenny Corbett for their comments.
  2. 2. <ul><li>1 . Introduction </li></ul><ul><li>2. Current State of Financial Cooperation </li></ul><ul><li>3. Obstacles to Financial Integration </li></ul><ul><li>4. Creating Conditions for Financial Market Integration </li></ul><ul><li>5. Possible New Measures for Strengthening Financial Market Cooperation </li></ul><ul><li>6. Concluding Remarks </li></ul><ul><li>References </li></ul><ul><li>Appendix   </li></ul><ul><li>  </li></ul>
  3. 3. <ul><li>Introduction ----why do we need cooperation? </li></ul><ul><li>A broad consensus that collective response is needed to overcome and prevent the crisis. </li></ul><ul><li>Asian financial markets are more globally than regionally integrated , but the potential welfare gains of risk sharing from financial integration are huge, 1.2% of permanent consumption in a 10-year horizon and 4.11 % and 7.61% with 30- and 50-year horizons (see appendix). </li></ul><ul><li>Huge amounts of foreign reserves, regional financial market can serve as a good way to mobilize the savings. </li></ul>
  4. 4. <ul><li>2. Current State of Financial Cooperation---- at Its Early Stage </li></ul><ul><li>2.1 Financial Regulatory Cooperation </li></ul><ul><li>2.2 Bond Market Cooperation </li></ul><ul><li>2.3 Stock Market Cooperation </li></ul><ul><li>2.4 Derivatives Market Cooperation </li></ul>
  5. 5. <ul><li>2.1 Financial Regulatory Cooperation (Bilateral & multilateral) </li></ul><ul><li>Bilateral: signing bilateral MOUs </li></ul><ul><li>90 countries and regions of IOSCO members signed more than 1000 MOUs for bilateral cooperation </li></ul><ul><li>For example: </li></ul><ul><li>China ’s CSRC have signed 37 MOUs with 34 economies by June 2007, including 9 within the region. </li></ul><ul><li>Hong Kong ’s SFC has concluded 44 formal cooperative arrangements with 33 overseas regulators by June 2007 , including 10 within the region. </li></ul>
  6. 6. <ul><li>Multilateral : signing IOSCO MMOU and some proposals. </li></ul><ul><li>Nine Asian economies have become or have committed to become a signatory to IOSCO MMOU, the first global information-sharing arrangement among security regulators. </li></ul><ul><li>Asian BIS ( Fraser, 1995) and An Expanded EMEAP -Proposal Ⅰ ( Rajan, 1999; Girardin, 2004) </li></ul><ul><li>Asian Financial Institute (AFI)-Proposal Ⅱ ( Eichengreen , 2001&2002 ) on the platform of ASEAN+3, providing technical assistance to national agencies seeking to strengthen prudential supervision and regulation; running training programs for bank inspectors etc.; encouraging the efficient pooling of knowledge and expertise; providing reserve management, clearing and settlement services. </li></ul>
  7. 7. <ul><li>2.2 Bond Market Cooperation </li></ul><ul><li>Asian Bond Markets Initiative (ABMI) ----supply side </li></ul><ul><li>Asian Bond Fund (ABF) ----demand side </li></ul><ul><li>ABMI: </li></ul><ul><li>Focus on two areas: </li></ul><ul><li>(i) Facilitating access to the market through a wider variety of issuers; </li></ul><ul><li>(ii) Enhancing market infrastructure to foster bond markets in Asia. </li></ul><ul><li>Solution: six voluntary working groups (WG) and a Focal Group (FG) </li></ul>
  8. 8. <ul><li>ABF: </li></ul><ul><li>ABF1: US$1 billion, investing in U.S. dollar-denominated government and quasi-government bonds of eight ASEAN+3 countries. </li></ul><ul><li>ABF2: US$2 billion, investing in local currency-denominated sovereign and quasi-sovereign bonds of eight ASEAN+3 countries. </li></ul>
  9. 9. <ul><li>2.3 Stock Market Cooperation ( Bilateral, </li></ul><ul><li>Multilateral & Cross Listing) </li></ul><ul><li>Bilateral Cooperation : </li></ul><ul><li>Figure 1 A Market Linkage Model (Shimizu) </li></ul>
  10. 10. <ul><li>SGX-TSE strategic alliance in October 2001 </li></ul><ul><li>ASX-SGX co-trading linkage in December 2001 </li></ul><ul><li>TSE and KRX signed “Memorandum of Intent” of cross-border securities trading in August 2005 </li></ul><ul><li>TSE and KRX signed a Memorandum of Understanding (MOU) on the &quot;Market Alliance Project&quot; on July 7, 2006. </li></ul><ul><li>TSE spent about $304 million to buy a 4.99 per cent stake in the SGX in June 2007 </li></ul>
  11. 11. <ul><li>Multilateral Cooperation </li></ul><ul><li>ASEAN committed to develop an inter-linked ASEAN securities market by 2010 </li></ul><ul><li>East Asian Stock Exchanges Conference (EASEC) founded in 1982 to facilitate the exchange of information among member exchanges. </li></ul><ul><li>East Asian Oceania Stock Exchanges Federation (EAOSEF) founded in 1990, changed into AOSEF in 2005 and expanded to 17 members currently. </li></ul>
  12. 12. <ul><li>TSE intended to cooperate with stock exchanges of 10 Asian cities in 2002 on the research of constructing a system for the mutual free transactions of stock and bonds listed in the 11 stock exchanges and promoting the cross listing for a same enterprise. </li></ul><ul><li>Other forms of cooperation among independent supervision organizations in securities industry, such as Asian Securities Forum, Asian Securities Analysts Federation. </li></ul><ul><li>Financial institutions also play an active role. For example, five major Asian Securities Houses from four Asian economies formed the first Pan-Asian online stock exchange network, Asian Stock Exchange Network in April 2000. </li></ul>
  13. 13. <ul><li>Cross Listing : </li></ul><ul><li>Eighty-one Chinese companies got listed in eight main overseas markets, raising 20.4 billion US dollars in 2005. The figures were 86 and 44 billion US dollars in 2006. </li></ul><ul><li>340 mainland-based companies have been listed in Hong Kong. </li></ul><ul><li>105 mainland-based companies have been listed in SGX by August 2006. </li></ul><ul><li>However, according to IMF Asia-Pacific Regional Outlook (September 2005), a few stock markets in the region have attracted a large international presence, but not from Asia. </li></ul>
  14. 14. <ul><li>2.4 Derivatives Market Cooperation </li></ul><ul><li>As for foreign exchange trading, derivative trading is concentrated in the region’s financial centers - Japan, Singapore, Hong Kong SAR (de Brouwer, 2003) </li></ul><ul><li>Singapore takes the leadership in the region for index futures trading based on stock trading in other economies. </li></ul><ul><li>1986, SIMEX, which later was merged with SGX, first introduced the Nikkei 225 Index Futures. </li></ul><ul><li>1997, SIMEX introduced MSCI Taipei,China index futures </li></ul><ul><li>2000, CNX Nifty (India) Index futures </li></ul><ul><li>2006, FTSE/Xinhua China A50 Index </li></ul><ul><li>Asian Pacific Association of Derivatives (APAD) , set up in 2004, is an organization comprising academics, practitioners and regulators to promote research and increase knowledge of the use of derivative securities and markets. </li></ul>
  15. 15. <ul><li>3. Obstacles to financial integration </li></ul><ul><li>3.1 Diversity of Member Countries </li></ul><ul><li>3.2 Low Financial Openness </li></ul><ul><li>3.3 Lack of Infrastructures </li></ul><ul><li>3.4 Geopolitical Rivalry </li></ul><ul><li>3.5 Lack of Leading Financial Center </li></ul><ul><li>Pushing Financial Integration </li></ul>
  16. 16. <ul><li>3.1 Diversity of Member Countries </li></ul><ul><li>Diversity of stages of economic development: </li></ul><ul><li>Per capita incomes range from $218 in Myanmar to $36500 in Japan at current prices in US Dollars in 2004 </li></ul><ul><li>Exports as a share of GDP range from more than 100% in Singapore and Hong Kong to a mere 13.6% in Ja pan in 2004. </li></ul><ul><li>Diversity of domestic financial markets: </li></ul><ul><li>Size of equity markets (see table 1 ) </li></ul><ul><li>Efficiency of equity markets (see figure 2 ) </li></ul>
  17. 17. Table 1 Size of equity markets <ul><li>Source: Ghosh ( 2006 ) </li></ul>Economy Bank assets Equity market capitalization Bonds outstanding 1997 2005 1997 2005 1997 2005 China 124.6 163.1 11.2 17.8 12.9 24.4 Indonesia 31.1 49.8 12.2 28.9 1.9 19.6 Korea 37.9 93.5 8.1 91.2 25.2 76.2 Malaysia 100.9 159.4 93.2 138.0 57.0 88.0 Philippines 56.1 63.2 37.7 40.4 22.4 36.7 Thailand 79.7 103.6 15.1 70.1 7.1 40.8 Hong Kong SAR 205.1 444.6 234.5 593.6 26.0 46.6 Singapore 122.0 185.4 110.8 220.4 24.7 68.2
  18. 18. Figure 2 Efficiency of equity markets
  19. 19. <ul><li>3.2 Low Financial Openness </li></ul><ul><li>A sizable proportion of shares remain inaccessible to cross-border investors. As of end-2004, foreign investors had no access to around 42 percent of the stock market in the Philippines, 41 percent in China and 36 percent in Thailand. (see table 2 ) </li></ul><ul><li>Asian economies vary greatly in the freedom of capital market (see table 3 ) , categorized as: </li></ul><ul><li>high degree of freedom: Japan, Hong Kong and Singapore </li></ul><ul><li>financial restrictions were greatly relaxed after financial liberalization in 1980s but experienced a reverse trend after 1997 financial crisis: South Korea, Thailand, Malaysia and the Phillippines </li></ul><ul><li>strict financial restrictions: China, India and Indonesia </li></ul>
  20. 20. Table 2 Foreign Participation in the Stock Market (2004) (In percentage point)
  21. 21. Table 3 Freedom Index of Capital Markets Source: Economic Freedom of the World 2006 Annual Report.   1980 1985 1990 1995 2000 2001 2002 2003 2004 China 0 2 5 5 0.8 0.8 0.8 0.8 0.8 Hong Kong 10 10 10 10 9.2 9.2 8.5 8.5 8.5 India 0 0 0 0 0 0 0 0 0 Indonesia 0 0 0 0 1.5 1.5 1.5 1.5 1.5 Japan 2 5 8 8 7.7 7.7 7.7 8.5 8.5 Malaysia 5 5 5 5 0.8 0.8 0.8 0.8 0.8 Philippines 2 2 2 5 0.8 0.8 0.8 0.8 0.8 Singapore 8 10 10 10 5.4 6.2 6.2 6.2 6.2 South Korea 0 2 5 5 0 1.5 1.5 1.5 1.5 Taipei,China 2 2 5 5 - - - - - Thailand 2 2 2 2 1.5 1.5 1.5 1.5 1.5
  22. 22. <ul><li>3.3 Lack of Infrastructures </li></ul><ul><li>Efficiency of Asian financial markets would hinge on well-developed regional transaction systems of payment, clearing, settlement and depositary services that ensure real time gross settlement with delivery versus payment for cross-border transactions. </li></ul><ul><li>At present, the requisite infrastructures for regional financial market hardly exist and it may take years to build them. </li></ul>
  23. 23. <ul><li>3.3 Geopolitical Rivalry </li></ul><ul><li>The potential rivalry between China and Japan for regional hegemony </li></ul><ul><li>China and Japan have different interests and hence different strategies for economic integration in East Asia </li></ul><ul><li>Political tensions between Japan and its Northeast Asian neighbors over history issues </li></ul><ul><li>ASEAN has made great efforts in pushing the Asian economic and financial integration, but its economic and political power, especially that of respective country, falls far behind of China and Japan. </li></ul>
  24. 24. <ul><li>3.5 Lack of Leading Financial Center Pushing Financial Integration </li></ul><ul><li>Though having three important regional financial centers, Tokyo, Hong Kong and Singapore, Asia still lacks an anchor country or financial center that can mediate financial transactions within the region, helping to attract regional investors into the regional securities markets. </li></ul>
  25. 25. <ul><li>4. Creating conditions for financial market integration </li></ul><ul><li>4.1 Deepening Economic Integration </li></ul><ul><li>4.2 Further Capital Account Liberalization </li></ul><ul><li>4.3 Infrastructures Building </li></ul><ul><li>4.4 Cooperation and Coordination among </li></ul><ul><li>China, Japan ,Korea and ASEAN </li></ul><ul><li>4.5 Development Strategy of Financial </li></ul><ul><li>Centers </li></ul>
  26. 26. <ul><li>4.1 Deepening Economic Integration </li></ul><ul><li>Trade integration and financial integration are closely linked. </li></ul><ul><li>Asia’s trade openness has increased over the years </li></ul><ul><li>The aggregate share of emerging Asia in world trade increased from about 13 percent in 1990 to 20 percent in 2004. </li></ul><ul><li>Over the past two decades, intra-regional trade share of total trade nearly doubled to about 41 percent , a level comparable to that in NAFTA countries. </li></ul><ul><li>Signing of FTAs </li></ul>
  27. 27. <ul><li>4.2 Further Capital Account Liberalization </li></ul><ul><li>Researchers have found that capital account liberalization has a positive role in the integration of financial markets, such as Chelley-Steeley and Steeley (1999), Eichengreen and Park (2005) </li></ul><ul><li>Trairatvorakul (2001) argues that cross-border flows of capital in financial markets should be liberalized to enable participating markets to fully benefit from the regional capital market or some kinds of stock exchanges alliances. </li></ul>
  28. 28. <ul><li>4.3 Infrastructures Building </li></ul><ul><li>Linking Clearing And Settlement Systems : creating an International CSD (Central Securities Depositories) for Asia (AsiaClear) </li></ul><ul><li>Regional Credit Rating Agency : Association of Credit Rating Agencies in Asia (ACRAA), 22 credit agencies as members from 12 economies in the region </li></ul><ul><li>Credit Guarantees : combination of securitization and credit enhancement mechanisms is considered as a model for the Asian bond market and to reduce the gap between borrowers’ credit standing and investors’ requirements. </li></ul>
  29. 29. <ul><li>4.4 Cooperation and Coordination among China, Japan and ASEAN </li></ul><ul><li>“ hot economics and cold politics” </li></ul><ul><li>The role of China and Japan in East Asia ’s integration process is synonymous with that of France and Germany in Europe’s integration process (Sakakibara ,2001) </li></ul><ul><li>ASEAN might act as a coordinator and propellant for cooperation between China and Japan. </li></ul>
  30. 30. <ul><li>4.5 Development Strategy of Financial Centers </li></ul><ul><li>Hong Kong: can attract more Asian companies to be listed in Hong Kong and play the role of integrating Asian equity markets as a leading regional and world financial center. </li></ul><ul><li>TSE: in dire need of a systems upgrading to attract more foreign listings. </li></ul><ul><li>Singapore: is trying to become the center of futures and derivative trading in Asia, with 100 hedge funds managing about $6 billion assets. </li></ul>
  31. 31. <ul><li>5. Possible New Measures for Strengthening Financial Market Cooperation </li></ul><ul><li>5.1 Financial Regulatory Cooperation </li></ul><ul><li>5.2 Bond Market Cooperation </li></ul><ul><li>5.3 Stock Market Cooperation </li></ul><ul><li>5.4 Derivative Market Cooperation </li></ul>
  32. 32. <ul><li>5.1 Financial Regulatory Cooperation </li></ul><ul><li>Continue the bilateral regulatory cooperation by signing MOUs and developing mutual visit system and information exchange system by the regulatory agencies. </li></ul><ul><li>Multilateral efforts, i.e. to establish a regulatory cooperation institution to improve the regulation rules and practices </li></ul><ul><li>Eichengreen’s idea of AFI : playing the role of developing and implementing common regional prudential measures in the financial area. </li></ul>
  33. 33. <ul><li>5.2 Bond Market Cooperation </li></ul><ul><li>Enhancing the Role of ABMI </li></ul><ul><li>Cultivating the bond market by promoting three-level bond issuers, i. e. government, big enterprises and SMEs. </li></ul><ul><li>Enhancing market infrastructure through the continued work of working groups. </li></ul><ul><li>Improving the Operation of ABF </li></ul><ul><li>ABF1 and ABF2 concentrating on sovereign and quasi-sovereign securities. </li></ul><ul><li>ABF3: providing credit support for Asian sovereign bonds and other bonds that do not receive good crediting to promote the securitization of bank assets. </li></ul><ul><li>ABF needs to make further efforts in term of size, investment area and currency-denominations. </li></ul><ul><li>Private Sector Involvement in Asian Bond Market </li></ul>
  34. 34. <ul><li>5.3 Stock Market Cooperation </li></ul><ul><li>Cooperation Between Stock Exchanges </li></ul><ul><li>A world trend </li></ul><ul><li>Providing investors and other market participants with greater value and more diverse services. </li></ul><ul><li>Cross Listing </li></ul><ul><li>TSE, SGX &Hong Kong are taking actions to create conditions for the expansion of cross listing, especially companies from China and other developing countries in the region. </li></ul>
  35. 35. <ul><li>5.3 Derivative Market Cooperation </li></ul><ul><li>(To be added). </li></ul>
  36. 36. <ul><li>6. Concluding remarks </li></ul><ul><li>Adopt the principle of sequencing : The developed markets already started to take bilateral actions on market alliances, after the success of bilateral efforts, other economies will join sequentially. </li></ul><ul><li>Incentives: </li></ul><ul><li>Developed markets: provide investors and other market participants with greater value and more diverse services. </li></ul><ul><li>Less developed markets: cannot achieve financial market integration with tight capital account control, then join the process as capital account control is lessened, learn from early mistakes and feel easier to catch up. </li></ul>
  37. 37. References <ul><li>Asian and Pacific Department, IMF. Asia-Pacific Regional Outlook— September 2005. </li></ul><ul><li>Basu, Sankarshan, Bappaditya Mukhopadhyay. Derivatives in Asia-Pacific Markets. Journal of Emerging Market Finance. 2006(5): 207. </li></ul><ul><li>Cavoli, Tony, Ramkishen S. Rajan, and Reza Siregar. A Survey of Financial Integration in East Asia: How Far? How Much Further to Go? University of Adelaide, Center for International Economic Studies, Discussion Paper 0401,2004. </li></ul><ul><li>Chaipravat, Olarn, Bhasu B. Supapol and Kanit SangsubhanRegional Self-Help and Support Mechanisms: Beyond the CMI. paper submitted to the ASEAN Secretariat 2003. </li></ul><ul><li>Chelley-Steeley, Patricia L & Steeley, James M. Changes in the Comovement of European Equity Markets. Economic Inquiry, Oxford University Press , vol. 37(3), pages 473-88, July1999. </li></ul><ul><li>Cowen, David, Ranil Salgado, Hemant Shah,Leslie Teo, and Alessandro Zanello,2006, Financial Integration in Asia: Recent Developments and Next Steps, IMF Working Paper, WP/06/196 </li></ul><ul><li>De Brouwer, Gordon. Financial Markets, Institutions, and Integration in East Asia. Source: Asian Economic Papers, 1 September 2003, vol. 2, no. 3, pp. 161-161(1). Publisher: MIT Press </li></ul><ul><li>Eichengreen, Barry. Hanging Together? On Monetary and Financial cooperation in Asia. World Bank Conference on East Asia after the Crisis, 2001. </li></ul><ul><li>Eichengreen, Barry. What to Do with the Chiang Mai Initiative[R]. Korea: AEP conference paper, 2002. </li></ul>
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  42. 42. <ul><li>Appendix: Welfare gains from financial market integration </li></ul><ul><li>Benchmark model </li></ul><ul><li>Data and parameters calculation </li></ul><ul><li>Welfare Gains (see the A-table ) </li></ul>
  43. 43. Benchmark model
  44. 48. Data and parameters calculation
  45. 49. Welfare gains
  46. 51. Thank you

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