The purpose of this study is to re-examine Taiwan’s progress in entering the international financial arena and achievement in the liberalization of the banking industry by implementing a GARCH error correction model incorporating the missing-data effect. The evidence show that the causality relationships with consideration of missing data are drastically different from those without taking into account of them, confirming the existence of the missing- data effect. Bi-directional Granger causality relationships are supported for all pairings of markets when both heteroscedasticity and mis-specification of models are considered. In addition, Taiwan’s liberalization of the banking industry is more successful than previously believed, being proved by its long-term co-movements with Singapore and London.

The purpose of this study is to re-examine Taiwan’s progress in entering the international financial arena and achievement in the liberalization of the banking industry by implementing a GARCH error correction model incorporating the missing-data effect. The evidence show that the causality relationships with consideration of missing data are drastically different from those without taking into account of them, confirming the existence of the missing- data effect. Bi-directional Granger causality relationships are supported for all pairings of markets when both heteroscedasticity and mis-specification of models are considered. In addition, Taiwan’s liberalization of the banking industry is more successful than previously believed, being proved by its long-term co-movements with Singapore and London.