Financial Integration of New EU Member States

By Lorenzo Cappiello, Bruno Gérard, Arjan Kadareja, Simone Manganelli. Social Science Research Network, 2006

116 citations recorded by the source corpus.

This study assesses the degree of financial integration for a selected number of new EU member states between themselves and with the euro zone. Within the framework of a factor model for market returns, we measure integration as the amount of variance explained by the common factor relative to the local components. We show that this measure of integration coincides with return correlation. Correlations are proxied by comovements, estimated via a regression quantile-based methodology. We find that the largest new member states, the Czech Republic, Hungary and Poland, exhibit strong comovements both between themselves and with the euro area. As for smaller countries, only Estonia and to a less extent Cyprus show increased integration both with the euro zone and the block of large economies. In the bond markets, we document an increase in integration only for the Czech Republic versus Germany and Poland. JEL Classification: C32, F30, G12

View Paper: https://www.semanticscholar.org/paper/112affa47c3f47fadf7abbbc7992a11ebf5f064a

How researchers see this paper

The researchers whose trusted networks rank it highest, strongest advocate first. Every researcher gets a different order.

1. R. Horvath
2. D. Petrovski
3. Dritan Gjika
4. Tomáš Havránek

Citations in the corpus

• International stock market integration: Central and South Eastern Europe compared (2013, background): “(8) Thus, we have the conditional variance equations for both returns series (h11,t and h22,t) and conditional covariance equation between the series (h12,t).”
• MEASURING FINANCIAL INTEGRATION IN NEW EU MEMBER STATES (2008, unknown): “A complementary strategy is to consider more sophisticated measures of comovements (see, for instance, Cappiello et al. 2006, and Gerard et al. 2006).”