ABSTRACT
Financial integration allows different economies to smooth local shocks by borrowing on the international interbank market. The degree of regional and global financial integration is thus important for stabilizing economies. In a wellintegrated market, assets with the same risk characteristics would yield identical expected returns. Controlling regulatory treatments and time differences, the yield spreads among fixed-income assets denominated in the same currency should be equalized in normal times. However, reflecting risk characteristics, the spreads may show substantial differences in crisis periods. This chapter explores how the Asian money markets have been integrated with the London money market since the 1990s.
