Financial Integration among RCEP (ASEAN+6) Economies:Evidences from Stock and Forex Markets

This study investigates the financial integration among the Regional Comprehensive Economic Partnership (RCEP) countries which comprises ASEAN member countries and 6 non- ASEAN countries (India, China, Republic of Korea, Japan, Australia and New Zealand). It examines the co-movements of stock market and foreign exchange market at three levels: among ASEAN members; among non-ASEAN RCEP economies, viz., India, China, Republic of Korea, Japan, Australia and New Zealand; and among all RCEP (i.e., ASEAN+6) economies as a congregation. The strength of the study is that it employs advanced econometric techniques such as Gregory-Hansen cointegration test and multivariate DCC GARCH model. In case of stock indices, it is found that there is no cointegration both among ASEAN economies as well as among non-ASEAN RCEP economies. However, when they are combined to form RCEP, exhibited a cointegration equation. In terms of exchange rate, there is evident cointegration among ASEAN economies as well as among non-ASEAN RCEP economies, but there exists no cointegration within RCEP.