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2010-07-27

Questions on effects found of regional financial integration

Comments on Jenny Corbett, ANU, and Christopher Findlay “Getting the sequence right in regional financial markets”, 27/07/2010, http://www.eastasiaforum.org/2010/07/27/getting-the-sequence-right-in-regional-financial-markets/
It is an interesting study and useful findings.

A few quick questions on some details:

1. The finding that a higher level of financial integration is not associated with an increase in business cycle synchronicity: does that have anything to do with different output structures associated with different stages of their economies i.e. diversity in their output structures, would the results vary according to the degree of output similarity? And how long is the data for: is there any potential of delayed impacts?

2. Consumption smoothing of the 23, 2 and 75% effects of the three factors: how do the 23 and 2 correlate with the proportions of domestic and overseas financing? Do they vary with countries' saving and consumption patterns, i.e. the a quarter smoothing offset by saving ratios, or the degree of finance availability or easiness? Also, how does that reflect effects of expectations and error corrections?

3. How can social engineering learn from mechanical engineering, such as shipbuilding, by including some cushioning mechanisms, like some apartments in large ships (I do not know if they have that, but some movies suggest they have those, so if some parts of a ship are damaged, they may be contained to a certain degree? Could global and regional financial architecture include such mechanisms, so it can contain shocks and prevent them from spreading?

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