ABSTRACT
In this chapter, we investigate the level of economic and financial integration (including capital market, currency market and the banking system) amongst eight SAARC countries by adopting a survey-based approach. We find that the perceived level of economic and financial integration of India is the highest with Nepal and Bhutan, and lowest with Afghanistan amongst all SAARC countries. We also explore the fundamental factors driving economic and financial integration by assessing the perceptions of the opinion leaders. High trade openness and trade linkages amongst the countries are considered to play vital role in expediting the process of economic integration in the region. As regards capital market integration, market institutional development, synchronization of regulation and trading practices, and accounting and tax policies are considered to be very important. Banking sector development, credit risk management and corporate governance have been opined to be important in strengthening banking system integration. In case of currency markets, regional cooperation arrangement is considered to be very important in strengthening linkages amongst them. The views of the opinion leaders are critical in cohesive policy formulation; therefore, our survey findings have important implications for forming an integrated development strategy for the region.
