Abstract

In this study, it has been intended to conduct a performance evaluation of several countries throughout the world with respect to the ongoing process of financial integration. The initially determined 14 variables pertaining to the analyzed countries have been separated into various independent factors by the assistance of principal components analysis. The correlations among these interdependent variables within the scope of the study must be eliminated. Furthermore, it is a desirable situation to carry out an analysis with fewer but independent variables instead of dealing with numerous correlated variables. Many of the multivariate analysis methods are based on the principle of eliminating this correlation among the variables. The principal components analysis and factor analysis are the leading choices among such methods. The database of this study has been compiled from time-series observations of 14 different variables belonging to a total of 48 countries consisting of both developed and emerging markets for the period of 2000 to 2007. The distributions of these data have been analyzed for each year and hence, an evaluation of the countries “setting (originating) capital flows”, “transmitting capital flows” and “terminating capital flows” have been conducted. In advance of this evaluation, the concepts of setting, transmission and termination of capital inflows has been explained through the studies conducted by the integration variables.

Key words: Model, economic, financial integration, market integration power.