International integration from capital flow and regional trade agreement perspectives

• Main Author: Dang, Nhu Van
• Other Authors: Shahidur Rahman
• Format: Theses and Dissertations
• Language: English
• Published: 2010
• Subjects: DRNTU::Social sciences::Economic theory::International trade
• Institution: Nanyang Technological University

This thesis studies international economic integration through the two major channels: capital flows and Regional Trade Agreements (RTAs). With regard to capital flows, the thesis tries to explore the responsiveness capital to gravity factors and compare it to trade flow, to use institution variable as an explanation for the Lucas Paradox, and to use specific control variables to explain the motivation of capital flow. Moreover, capital flow tend to take place in tandem with trade flow, this research will also study the mutual effect between them. With regard to the implications of RTAs, this thesis deals with both the real and financial effects of these cooperation arrangements among countries to explore whether RTAs play any role in both business cycle synchronization and financial market co-movement among member economies. The empirical work in this research shows that capital flow is as responsive as trade is to gravity factor, that institution quality can explain the Lucas Paradox, and there is some evidence of risk diversification motivation in the international portfolio choice. In addition, trade and finance tend to mutually reinforce. The findings also indicate that RTAs play significant role in strengthening business cycle synchronization and financial market co-movement between member countries.