Did Financial Integration Provide Financial Depth to ASEAN Countries?

Abstract

After East Asian financial crisis of 1997-1998, financial integration between ASEAN nations increased. But most of the ASEAN countries could not get better consequences of integration i.e. growth and risk sharing. To have a financial integration that makes economic sense, countries must attain financial depth. This study investigates whether ASEAN countries in our sample (Indonesia, Malaysia, Singapore, Thailand, Japan, and the Philippines) increased their financial depth by having a strong degree of financial integration. Our results indicate that in the short-run, only Indonesia and Philippines could achieve financial depth. However, in the long-run, Indonesia, Malaysia, Philippines, Singapore, and Thailand experienced the role of financial integration in enhancing financial depth. Only Japan witnessed no role of financial integration in the short-run as well as in the long-run. The results indicate that focus on stock market development may lead to more financial depth in the long-run as well as in the short-run