Harold Thiewes

International linkage of interest rates: Evidence from the emerging economies of Asia

Abstract This article employs monthly short-term interest rate data over the 1980–1999 period to investigate the intermarket interest rate linkages across seven newly industrialized markets in Asia, and the influence that Japan and the US exert on interest rates in the region. In an attempt to isolate the impact of the liberalization process from the Asian financial crisis on interest rate transmission mechanisms, the sample period is broken down into two equally divided subperiods (1980 through 1989 and 1990 through 1999). The results from the study indicate that (a) the national short-term interest rate nexus is inherently a steady-state, long-run phenomenon, in that they are found to be cointegrated; (b) there is a pronounced increase in the cross-country interest rate linkages during the 1990s; (c) Hong Kong and Singapore play an important, but not dominant, role in the Asian region, and serve to integrate the regional economies and mediate the short-run linkages between the regional and the world financial markets; and (d) while Japan played an influential role during the 1980s, the US supplants Japans role during the 1990s. Several policy implications are derived.

Return Dynamics Across the Asian Equity Markets

The degree of integration among different economies is an important issue in international economics and finance. This article employs daily stock market data for the period 1988 through 1999 to investigate the return dynamics and the extent of the stock market linkages across six newly industrialized countries (NIC’s) of Asia, and documents the role of Japan and the US in this region. Primarily, the study finds that there are significant stock market linkages among the emerging equity markets of Hong Kong, India, Korea, Malaysia, Singapore and Thailand. While dominant relationships do exist, no country is totally insulated from market movements that emanate from other countries in the region. Furthermore, the study documents the presence of temporal instability in the transmission mechanism that coincides with the Asian economic crisis. During the period in which the NIC’s experienced rapidly rising stock valuations, Singapore and the US had dominant causal influences on these Asian markets. However, in the period of financial crisis during the latter part of the 1990s decade, Singapore’s influence is greatly diminished while shocks from other countries, most notably India, play a more dominant role. Several important policy implications are derived from the results.

Cross-Border Linkages among Asian Closed-End Funds

This study investigates the behavior of nine Asian closed-end country funds traded on the NYSE over the period 1990–2001. The results indicate that fund discounts follow a mean-reverting process and, furthermore, display various cross-border patterns of influence that are contingent on the period examined. Notably, for the overall period, the Korean Fund exhibits the strongest market leadership. However, in the period following the Asian financial crisis, movements in the Thai Funds discount have the strongest influence on, and responsiveness from, the other country funds.