Financial interlinkages are uniform across Asia region: BoJ paper

A Bank of Japan paper published on Wednesday says the degree of international spillover from stock markets globally to Asia is uniform irrespective of the country.

The paper's authors, Ippei Fujiwara and Koji Takahashi, examine how Asian financial markets are linked to markets in developed countries and the main drivers of fluctuations in Asian financial markets as well as real economic activities. They look at interlinkages between the euro area, Japan, US, China, Hong Kong, South Korea, Singapore, Taiwan, Indonesia, Malaysia, the Philippines and Thailand.

Fujiwara and Takahashi show that the degree of international spillover in stock markets is uniform irrespective of the group of countries. The evidence suggests that while the US has been the main driver of fluctuations, China emerges as an important source of fluctuations in real economic activities. Furthermore, inflation expectations seem to be a key driver of country specific developments in nominal bond yields.

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