Measuring European Financial Integration

By Lieven Baele, Annalisa Ferrando, Peter Hördahl, E. Krylova, Cyril Monnet. Social Science Research Network, 2004

275 citations recorded by the source corpus.

In this paper, we present a set of specific measures to quantify the state and evolution of financial integration in the euro area. Five key markets are considered, namely the money, corporate-bond, government-bond, credit, and equity markets. Building upon the law of one price, we have developed two types of indicators that can be broadly categorized as price-based and news-based measures. We have complemented these measures by a number of quantity-based indicators, mainly related to the evolution of the home bias. Results indicate that the unsecured money market is fully integrated, while integration is reasonably high in the government- and corporate-bond markets, as well as in the equity markets. The credit market is among the least integrated, especially in the short-term segment.

Subfields: Economics and Econometrics, Finance

View Paper: https://www.semanticscholar.org/paper/3addfb191fb9810d9f8b587fd1418a35eebf4320

How researchers see this paper

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

In Economics and Econometrics

In Finance

Citations in the corpus

Securitisation and the Bank Lending Channel (2007, unknown): “The disappearance of exchange rate risk among euro-area countries, the increase in financial integration (Baele et al., 2004) and a more market-based financial system have all contributed to enhancing the liquidity and size of the securitisation market.”
Securitisation and the Bank Lending Channel (2009, unknown): “The disappearance of exchange rate risk among euro-area countries, the increase in financial integration (Baele et al., 2004) and a more market-based financial system have all contributed to enhancing the liquidity and size of the securitisation market.”
International stock market integration: Central and South Eastern Europe compared (2013, background): “Third, Baele (2004) puts forward that looking at stock market comovements is one way to assess financial integration.”
M&As Performance in the European Financial Industry (2006, unknown): “See ECB (2004a) for a detailed overview of recent developments on EU banking structure and Gual (2004) for an assessment of the process of integration of EU banking markets.. BANCO DE ESPAÑA 13 DOCUMENTO DE TRABAJO N.º 0516 markets.”
Market Discipline, Financial Integration and Fiscal Rules: What Drives Spreads in the Euro Area Government Bond Market? (2007, unknown): “As before the monetary union large deficits were generally associated with sizeable spreads, people argue that the euro may have eliminated the capacity of bond markets to discriminate between the qualities of fiscal 1 See Baele et al. (2004) for a more formal definition of financial integration.”
The Macroeconomic Costs and Benefits of the EMU and Other Monetary Unions: An Overview of Recent Research (2010, unknown): “12 Based on evidence of falling yield spreads and the increasing importance of area-wide news for individual country debt returns, Lieven Baele et al. (2004) conclude that the euro-area public debt market has indeed become highly integrated.”
The European Union, the Euro, and Equity Market Integration (2010, background): “Of course, for these countries joining the Euro in 1999, nominal interest rate converged considerably (see Baele et al., 2004), but this may not necessarily lead to a full integration of real rates.”