Integration and Stock Market Co-Movement between Emerging Economies

In this paper, we investigate the impact of trade and financial liberalization on the degree
of stock market co-movement among emerging economies. Using a sample of 25 developing
countries observed over 15 years, we estimate the impact of reforms which aim at opening
these countries to trade and financial channels to the rest of the world. The estimation of
time-varying cross-country correlations allows the econometric investigation to be performed
using a panel data framework, raising hence the quality of the statistical inference. Our results
offer strong support in favor of a positive impact of trade and financial liberalization reforms
on the degree of cross-country stock market linkages.