Regional Financial Integration in the Caribbean : Evidence From Financial and Macroeconomic Data / Goohoon Kwon, Raphael Espinoza.

Format:

Book

Government document

Author/Creator:

Kwon, Goohoon.

Contributor:

Espinoza, Raphael.

International Monetary Fund. Middle East and Central Asia Department.

Series:

IMF Working Papers; Working Paper ; No. 2009/139

IMF Working Papers

Language:

English

Subjects (All):

Finance--Caribbean Area.

Finance.

Macroeconomics.

Caribbean Area--Economic policy.

Caribbean Area.

Physical Description:

1 online resource (37 p.)

Edition:

1st ed.

Place of Publication:

Washington, D.C. : International Monetary Fund, 2009.

Language Note:

English

Summary:

This paper assesses the extent of regional financial integration in the Caribbean Community (CARICOM) by analyzing equity prices in the region and rigidity of external financing constraints. The results are presented in a cross-regional perspective. The Caribbean stock markets are not as well integrated as one would expect from the extent of cross-listing and importance of regional banking groups: price differentials of cross-listed stocks reach an average of 5 percent. Auto-Regressive models suggest that these price differentials are only slowly arbitraged away, with half-lives exceeding 7 worked days, even when looking only at large arbitrage opportunities (using a Threshold Auto-Regressive model). A speculative methodology using macroeconomic data seems to confirm these findings. A strong mean reversion of the current account (respectively regional trade imbalances) is interpreted, following Obstfeld and Taylor (2004), as a lack of ways to finance current account deficits, i.e. a lack of global (respectively regional) financial integration. The region appears to be much less integrated than the EU15 or the ASEAN+3 groups, although it fares well compared to other LDCs.

Contents:

Contents; I. Introduction; II. Background; III. Stock Price Convergence; A. Data; B. AR results; C. Threshold Auto-Regression (TAR) estimator; IV. Current Account Convergence and Regional Trade Balance; A. Theory; B. Estimation framework; C. Global Financial Integration; D. Intra-regional trade and regional financial integration; V. Conclusion; References; Appendix A; Tables; 1. Balance of Payments; 2. UNCTAD FDI Inward Stock (In millions U.S. dollars, 2001; 3. UNCTAD FDI Outward Stock (In millions of U.S. dollars, 2001); 4. Regional Exports, as a Share of GDP

5. Interest Rates: Principal Component Analysis, 1980m1-2005m126. Interest Comovements; 7. Cross-Listed Stocks; 8. Cross-Market Premium; 9. (G) ARCH-AR Model; 10. (G) ARCH-TAR Model; 11. β Coefficient from 1975-2005; 12. β Coefficient from 1975-90; 13. β Coefficient from 1991-2005; 14. Regional Financial Integration 1975-2005; 15. 1975-90 Estimates of Regional Financial Integration; 16. 1991-2005 Estimates of Regional Financial Integration; Figures; 1. Interest Rates in the CARICOM and Sigma-Convergence (3 month T-Bills); 2. Cross-Listed Stocks; 3. Convergence Speed vs. Foreign Liabilities

Notes:

"July 2009".

Includes bibliographic references.

Description based on print version record.

ISBN:

9786612843532

9781462392094

1462392091

9781452726861

1452726868

9781451872866

1451872860

9781282843530

1282843532

OCLC:

712987742