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Measurement of Financial Integration: An Application of Euler Test with Panel Data

Year 2015, Volume: 2 Issue: 2, 1 - 16, 23.07.2016

Abstract

The aim of this study is to analyze the presence and stages of development of financial integration in the world with reel variables. In order to achieve this goal, the time period of interest is divided into sub-periods, an extension of the Euler test in which the real interest rate differential is explained by the growth rate of real consumption of the domestic and the foreign country is used in this paper. In addition, new proxies are developed to measure real interest rate differential instead of ex post real interest rate. The proxies are obtained directly from the real economic variables that do not contain the measurement difficulties of ex post real interest rates, which, by nature, may contain monetary shocks, and may vary considerably according to the reference nominal interest rates and baskets that measure the price developments. After deriving these new proxies, the validity of the extended Euler test has been checked for 87 countries and the level of these countries’ integration with the world has been tested by taking United States as the base foreign country. For the examination period, results of this study show the existence of global financial integration, especially after the year 2000.

References

  • Açıkgöz, S., M. Balcılar ve B. Saraçoglu (2012). Openness and Financial Development: Time Series Evidence for Turkey. International Journal of Banking, Accounting and Finance, 2 172–201.
  • Chai, H. Y. ve Y. Rhee (2005). Financial integration and financial efficiency in East Asia. Paper presented at the Claremont-KIEP international conference, June 2005 www.cgu.edu/include/1118_Rhee1.pdf (08.08.2006).
  • Eijffinger, S. C. W., H. P. Huizinga ve J. G. Lemmen (1998). Short-term and long-term government debt and nonresident interest withholding taxes. Journal of Public Economics, 68 (3), 309–334.
  • King, R. ve R. Levine (1993). Finance, Entrepreneurship and Growth: Theory and Growth. Journal of Monetary Economics, 32, 513–542.
  • McKinnon, R. (1973). Money and Capital in Economic Development. Brookings Institution: Washington DC.
  • Meltzer, A. H. (2001). Monetary Policy in the New Global Economy: The of Japan. Cato Journal, 20, (1), 69–72. www.cato.org/pubs/journal/cj20n1/cj20n1.html (23.12.2005).
  • Michael, D. B., B. Eichengreen ve J. Kim (1998). Was There Really an Earlier Period of International Financial Integration Comparable to Today? NBER Working Papers 6738, National Bureau of Economic Research, Inc.
  • Obstfeld, M. (1989). How Integrated Are World Capital Markets? (Some New Tests. Debt, Stabilization and Development içinde ed. G. Calvo, R. Findlay ve J. Macedo) Oxford: Blackwell, 134-55.
  • Obstfeld, M. (1993). International Capital Mobility in 1990s, NBER Working Paper Series, Paper No. 4534
  • Obstfeld, M. (1998). The Global Capital Market: Benefactoror Menace? Journal of Economic Perspectives, 1 (2), 9–30.
  • Obstfeld, M. ve A. Taylor (2002). Globalization and Capital Markets, NBER Working Paper Series, Paper No. 8846
  • Ongun, T. (1993). Finansal Globalleşme. Ekonomik Yaklaşım, 4 (9), 35–46.
  • Rajan, R. G. ve L. Zingales (2003). The great reversals: the politics of financial development in the twentieth century. Journal of Financial Economics, 69 (1), 5–50.
  • Schumpeter, J. A. (1911). The Theory of Economic Development. Cambridge MA: Harvard University Press.
  • Shaw, E. S. (1973). Financial Deepening in Economic Development. New York: Oxford University Press.
  • Summers, R. ve A. Heston (1991). The Penn World Table: An Expanded Set of International Comparisons, 1950-1988. Quarterly Journal of economics, 106, 327–68.
  • Sylvester, C. W. E. ve J. J. G. Lemmen (2003). International Financial Integration. Volume I-II, Edward Elgar Publishing Ltd.

Uluslararası Finansal Bütünleşmenin Ölçümü: Euler Testi Yaklaşımının Panel Veri İle Uygulanması

Year 2015, Volume: 2 Issue: 2, 1 - 16, 23.07.2016

Abstract

Bu çalışmanın amacı dünyadaki finansal bütünleşmenin varlığının ve gelişim aşamalarının reel değişkenler ile araştırılmasıdır. Bu amaçla, inceleme dönemi alt dönemlere ayrılarak, ülke özelinde bir analiz yerine küresel bir bakış açısıyla ülkeleri toplu olarak incelemek hedefiyle, panel veri yöntemi ile analiz yapılmıştır. Reel faiz oranı farklarının yurtiçi ve yurt dışı reel tüketimdeki büyüme oranıyla açıklandığı Euler testinin bir uzantısı ve ex-post reel faiz oranları yerine reel faiz oranı farklılıklarını açıklamaya çalışan yeni vekil gösterge bu çalışmanın temelini teşkil etmektedir. Bu vekil gösterge, doğası gereği parasal şokları içerebilen ve referans nominal faiz oranlarına ve fiyat değişimlerinin ölçüldüğü sepete göre oldukça çok değişebilen ve gözlemlenemeyen ex-post reel faiz oranlarının ölçülmesindeki zorluğun üstesinden gelmek için doğrudan reel ekonomik değişkenlerden elde edilmiştir. Bu yeni göstergelerin oluşturulmasından sonra genişletilmiş Euler testinin geçerliliği 87 ülke için panel veri yöntemi ile analiz edilmiştir. Temel yabancı ülke olarak ABD esas alınarak testler gerçekleştirilmiştir. Yapılan araştırma sonucunda inceleme dönemi olan 1964 ve sonrasında, özellikle 2000'li yıllardan sonra küresel finansal bütünleşmenin varlığı gösterilmiştir.

References

  • Açıkgöz, S., M. Balcılar ve B. Saraçoglu (2012). Openness and Financial Development: Time Series Evidence for Turkey. International Journal of Banking, Accounting and Finance, 2 172–201.
  • Chai, H. Y. ve Y. Rhee (2005). Financial integration and financial efficiency in East Asia. Paper presented at the Claremont-KIEP international conference, June 2005 www.cgu.edu/include/1118_Rhee1.pdf (08.08.2006).
  • Eijffinger, S. C. W., H. P. Huizinga ve J. G. Lemmen (1998). Short-term and long-term government debt and nonresident interest withholding taxes. Journal of Public Economics, 68 (3), 309–334.
  • King, R. ve R. Levine (1993). Finance, Entrepreneurship and Growth: Theory and Growth. Journal of Monetary Economics, 32, 513–542.
  • McKinnon, R. (1973). Money and Capital in Economic Development. Brookings Institution: Washington DC.
  • Meltzer, A. H. (2001). Monetary Policy in the New Global Economy: The of Japan. Cato Journal, 20, (1), 69–72. www.cato.org/pubs/journal/cj20n1/cj20n1.html (23.12.2005).
  • Michael, D. B., B. Eichengreen ve J. Kim (1998). Was There Really an Earlier Period of International Financial Integration Comparable to Today? NBER Working Papers 6738, National Bureau of Economic Research, Inc.
  • Obstfeld, M. (1989). How Integrated Are World Capital Markets? (Some New Tests. Debt, Stabilization and Development içinde ed. G. Calvo, R. Findlay ve J. Macedo) Oxford: Blackwell, 134-55.
  • Obstfeld, M. (1993). International Capital Mobility in 1990s, NBER Working Paper Series, Paper No. 4534
  • Obstfeld, M. (1998). The Global Capital Market: Benefactoror Menace? Journal of Economic Perspectives, 1 (2), 9–30.
  • Obstfeld, M. ve A. Taylor (2002). Globalization and Capital Markets, NBER Working Paper Series, Paper No. 8846
  • Ongun, T. (1993). Finansal Globalleşme. Ekonomik Yaklaşım, 4 (9), 35–46.
  • Rajan, R. G. ve L. Zingales (2003). The great reversals: the politics of financial development in the twentieth century. Journal of Financial Economics, 69 (1), 5–50.
  • Schumpeter, J. A. (1911). The Theory of Economic Development. Cambridge MA: Harvard University Press.
  • Shaw, E. S. (1973). Financial Deepening in Economic Development. New York: Oxford University Press.
  • Summers, R. ve A. Heston (1991). The Penn World Table: An Expanded Set of International Comparisons, 1950-1988. Quarterly Journal of economics, 106, 327–68.
  • Sylvester, C. W. E. ve J. J. G. Lemmen (2003). International Financial Integration. Volume I-II, Edward Elgar Publishing Ltd.
There are 17 citations in total.

Details

Other ID JA57PT72AT
Journal Section Articles
Authors

Hakan Er This is me

Bedriye Saraçoğlu This is me

Publication Date July 23, 2016
Submission Date July 23, 2016
Published in Issue Year 2015 Volume: 2 Issue: 2

Cite

APA Er, H., & Saraçoğlu, B. (2016). Uluslararası Finansal Bütünleşmenin Ölçümü: Euler Testi Yaklaşımının Panel Veri İle Uygulanması. İktisadi Yenilik Dergisi, 2(2), 1-16.