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The nexus between financial integration and real economy: Solow-growth model concept
Affiliation:1. School of Economics and Finance, Collage of Business, RMIT University, Melbourne, Australia;2. Department of Finance, International Islamic University Malaysia, Malaysia;1. West Virginia University, USA;2. Loughborough University, UK;3. University of Nebraska-Omaha, USA;1. Department of Public Finance, Aksaray University, Aksaray, Turkey;2. TARC, University of Exeter, UK;3. Faculty of Management, IBS/IFHE Hyderabad, Room No: C-204, Hyderabad, India;4. Montpellier Business School, Montpellier, France;5. Faculty of Economics and Business Management, National University of Laos, Lao Democratic People’s Republic;1. IAB, Germany;2. DSE, Università di Bologna, Italy;1. Development Finance Centre, Graduate School of Business, University of Cape Town, South Africa;2. School of Accounting, Economic and Finance, University of KwaZulu-Natal, South Africa;1. Strategy, Finance and Risk Management, Lagos Business School, Pan–Atlantic University, KM 22, Lekki-Epe Expressway, Ajah, Lagos, Nigeria;2. School of Law, The University of Manchester, Oxford Road, Manchester, United Kingdom;3. Glasgow School for Business and Society, Glasgow Caledonia University, Cowcaddens Road, Glasgow, G4 0BA, United Kingdom
Abstract:This paper aims to investigate the nexus between financial integration and the real economy in ASEAN + 3 economies based on the concept of Solow-Growth Model. The equity indices as a proxy for financial markets are collected from each ASEAN + 3 members and are segmented between two periods; before and after the financial cooperation agreement period. The finding presents several outcomes; 1) no cointegration nexus is found in the system during the pre-agreement periods; 2) the markets are found cointegrated during the post-agreement period, 3) financial integration is found to influence the real sectors of ASEAN + 3 economies. Finally, this study offers policy implications to improve financial integration for stabilizing the real economy.
Keywords:Financial integration  Real economy  Generalized method of moments (GMM)
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