FINANCIAL STABILITY AND THE ROLE OF ECONOMIC AND FINANCIAL INTEGRATION IN SOUTH ASIA: EVIDENCE FROM TIME-SERIES DATA

摘要

Using the aggregate financial stability index (AFSI) which measures the gradual progression and changes in financial market stability, this paper empirically evaluates the impact of financial and economic integration on financial stability in South Asian countries using time-series data for the period 1980-2012. Auto-regressive distributed lag (ARDL) Bounds testing approach to cointegration is applied to ensure long-run relationship between variables. Bound F-test results confirm the long-run relationship between selected variables. The estimated results show that economic and financial integration has exerted a significant negative effect on financial stability in long run.