Capital Markets Integration in Developing Countries: Lessons for Ethiopia
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Date
2022-11-09
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A.A.U
Abstract
This study aimed at drawing lessons from the capital market integration experiences of East
African Community (EAC) and Association of South East Asian Nations (ASEAN), and
recommending to Ethiopia. To do so, the study raised research questions on the capital market
integration experiences of the two Regional Economic Communities (RECs), the possible long run
and short run relationship between stock traded value and other explanatory variables such as
liberalization, macroeconomic factors, and regulatory qualities, and finally what lessons Ethiopia
can learn from EAC and ASEAN experiences. To address these questions, the study used a
convergent parallel mixed research design, which used both qualitative (document and audio visual data review) and quantitative (panel ARDL) methods. The data of the study were entirely
secondary data. As such, the study found out that the regional capital market integration in EAC
and ASEAN states is consolidating from time to time and amelioration in members’ financial
system and crisis prevention capacity, especially in ASEAN, was observed; there is also a
statistically significant long run relationship between stock traded value and macroeconomic
variables and regulatory qualities, and lessons such as the necessity of capital market integration
or cooperation, especially with RECs like Common Market for Eastern and Southern Africa
(COMESA), prudent macroeconomic policies and regulatory frameworks were drawn for
Ethiopia. Finally, the study wrapped up recommending the necessity of participating in regional
cooperation and integration of stock markets and reconsidering the viability of Ethiopia’s
macroeconomic policies and regulatory frameworks through the lenses of liberalized financial
system.