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Asian Financial Linkage

: Macro-Finance Dissonance

August 2011
Ippei Fujiwara*1
Koji Takahashi*2


How are Asian financial markets interlinked and how are they linked to markets in developed countries? What is the main driver of fluctuations in Asian financial markets as well as real economic activities? In order to answer these questions, we estimate the spillover index proposed by Diebold and Yilmaz (2009) and gauge the degree of interactions in both financial markets and real economic activities among Asian economies. We first show that the degree of the international spillover in stock markets is like cookie-cutter products, namely, uniform, irrespective of the groups of countries, such as G3, NIEs and ASEAN4. This suggests the importance of the globally common shock in stock markets. We, then, discuss the macro-finance dissonance. In stock and bond markets, the US has been the main driver of fluctuations. Regarding real economic activities, China has emerged as an important source of fluctuations.

We have benefited from discussions with Toni Braun, Yin Wong Cheung, Ben Craig, Stefan Gerlach, Mathias Hoffman, Peter Tillman, participants at the Bundesbank Workshop on "Money, Finance and Banking in East Asia," and staffs at the Bank of Japan. Views Expressed in this paper are those of the authors and do not necessarily reflect the official views of the Bank of Japan.

  • *1   Financial Markets Department, Bank of Japan.
    E-mail :
  • *2   Bank of Japan and University of California, San Diego.


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