Quality & Quantity

, Volume 47, Issue 4, pp 1923–1941 | Cite as

Is the liberalization policy effective on improving bivariate cointegration of current accounts, foreign exchange, stock prices? Further evidence from Asian markets



This paper fist examines three set of bivariate cointegrations between any two of current accounts, stock markets, and currency exchange markets in 10 Asian countries. Furthermore, this work examined the effect of country characters on this bivariate cointegration. Our findings suggest that for three sets of cointegration test, each sample country at least exists one cointegration. India consistently exhibited a bi-directional causal relationship between any two of three indicators. Unlike Pan et al. (Int Rev Econ Financ 16:503–520, 2007 and Phylaktis and Ravazzolo (J Int Money Financ 24:1031–1053, 2005), this study found that such cointegration is influenced by three characteristics: capital control; flexibility in foreign exchange rates; and the ratio of trade to GDP. These characteristics are the result of liberalization in each Asian country. This implies that liberalization policies are effective on improving the cointegration between any two of financial markets and current account for 10 Asian countries.


Current account Stock price Foreign exchange rate Country characteristics Cointegration Causal relationships 


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© Springer Science+Business Media B.V. 2011

Authors and Affiliations

  1. 1.Department of Marketing ManagementTung Fang Design UniversityHunei TownshipTaiwan, ROC

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