IDEAS home Printed from https://ideas.repec.org/a/bla/reviec/v19y2011i1p137-157.html
   My bibliography  Save this article

Global Integration of Central and Eastern European Financial Markets—The Role of Economic Sentiments

Author

Listed:
  • Joscha Beckmann
  • Ansgar Belke
  • Michael Kühl

Abstract

This paper examines the importance of different economic sentiments, e.g. consumer moods, for the Central and Eastern European countries (CEECs) during the transition process. We first analyze the importance of economic confidence with respect to the CEEC's financial markets. Since the integration of formerly strongly regulated markets into global markets can also lead to an increase of the dependence of the CEECs' domestic market performance from global sentiments, we also investigate the relationship between global economic sentiments and domestic income and share prices. Finally, we test whether the impact of global sentiments and stock prices on domestic variables increases proportionally with the degree of integration. For these purposes, we apply a structural cointegrating VAR (CVAR) framework based upon a restricted autoregressive model which allows us to distinguish between the long-run and the short-run dynamics. For the long run we find evidence supporting relationships between sentiments, income and share prices in case of the Czech Republic. Our results for the short run suggest that economic sentiments in general are strongly influenced by share prices and income but also offer some predictive power with respect to the latter. What is more, global sentiments play an important role in particular for the CEECs' share prices and income. The significance of this link increases with economic integration.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Joscha Beckmann & Ansgar Belke & Michael Kühl, 2011. "Global Integration of Central and Eastern European Financial Markets—The Role of Economic Sentiments," Review of International Economics, Wiley Blackwell, vol. 19(1), pages 137-157, February.
    • Handle: RePEc:bla:reviec:v:19:y:2011:i:1:p:137-157
    as

    Download full text from publisher

    To our knowledge, this item is not available for download. To find whether it is available, there are three options:
    1. Check below whether another version of this item is available online.
    2. Check on the provider's web page whether it is in fact available.
    3. Perform a search for a similarly titled item that would be available.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Moritz Schularick & Thomas M. Steger, 2006. "Does Financial Integration Spur Economic Growth? New Evidence from the First Era of Financial Globalization," CER-ETH Economics working paper series 06/46, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich.
    2. W. Jos Jansen & Niek J. Nahuis, 2004. "Which survey indicators are useful for monitoring consumption? Evidence from European countries," Journal of Forecasting, John Wiley & Sons, Ltd., vol. 23(2), pages 89-98.
    3. Solnik, Bruno H., 1974. "An equilibrium model of the international capital market," Journal of Economic Theory, Elsevier, vol. 8(4), pages 500-524, August.
    4. Acemoglu, Daron & Scott, Andrew, 1994. "Consumer Confidence and Rational Expectations: Are Agents' Beliefs Consistent with the Theory?," Economic Journal, Royal Economic Society, vol. 104(422), pages 1-19, January.
    5. Carroll, Christopher D & Fuhrer, Jeffrey C & Wilcox, David W, 1994. "Does Consumer Sentiment Forecast Household Spending? If So, Why?," American Economic Review, American Economic Association, vol. 84(5), pages 1397-1408, December.
    6. Geert Bekaert & Robert J. Hodrick & Xiaoyan Zhang, 2009. "International Stock Return Comovements," Journal of Finance, American Finance Association, vol. 64(6), pages 2591-2626, December.
    7. Jason Bram & Sydney C. Ludvigson, 1998. "Does consumer confidence forecast household expenditure? a sentiment index horse race," Economic Policy Review, Federal Reserve Bank of New York, vol. 4(Jun), pages 59-78.
    8. Easaw, Joshy Z. & Heravi, Saeed M., 2004. "Evaluating consumer sentiments as predictors of UK household consumption behavior: Are they accurate and useful?," International Journal of Forecasting, Elsevier, vol. 20(4), pages 671-681.
    9. Schmeling, Maik, 2009. "Investor sentiment and stock returns: Some international evidence," Journal of Empirical Finance, Elsevier, vol. 16(3), pages 394-408, June.
    10. Burdekin, Richard C.K. & Redfern, Luke, 2009. "Sentiment effects on Chinese share prices and savings deposits: The post-2003 experience," China Economic Review, Elsevier, vol. 20(2), pages 246-261, June.
    11. Aaron Mehrotra & Jouko Rautava, 2008. "Do sentiment indicators help to assess and predict actual developments of the Chinese economy?," Journal of Chinese Economic and Business Studies, Taylor & Francis Journals, vol. 6(3), pages 225-239.
    12. Chelley-Steeley, Patricia L., 2005. "Modeling equity market integration using smooth transition analysis: A study of Eastern European stock markets," Journal of International Money and Finance, Elsevier, vol. 24(5), pages 818-831, September.
    13. Fratzscher, Marcel, 2002. "Financial Market Integration in Europe: On the Effects of EMU on Stock Markets," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 7(3), pages 165-193, July.
    14. G. Andrew Karolyi, 2003. "Does International Financial Contagion Really Exist?," International Finance, Wiley Blackwell, vol. 6(2), pages 179-199, July.
    15. Juselius, Katarina, 2006. "The Cointegrated VAR Model: Methodology and Applications," OUP Catalogue, Oxford University Press, number 9780199285679.
    16. Michael Lemmon & Evgenia Portniaguina, 2006. "Consumer Confidence and Asset Prices: Some Empirical Evidence," The Review of Financial Studies, Society for Financial Studies, vol. 19(4), pages 1499-1529.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Stillwagon, Josh R., 2015. "Testing the expectations hypothesis with survey forecasts: The impacts of consumer sentiment and the zero lower bound in an I(2) CVAR," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 35(C), pages 85-101.
    2. Al-Thaqeb, Saud Asaad, 2018. "Do international markets overreact? Event study: International market reaction to U.S. local news events," Research in International Business and Finance, Elsevier, vol. 44(C), pages 369-385.
    3. Bildirici, Melike E. & Badur, Mesut M., 2019. "The effects of oil and gasoline prices on confidence and stock return of the energy companies for Turkey and the US," Energy, Elsevier, vol. 173(C), pages 1234-1241.
    4. Joscha Beckmann & Ansgar Belke & Michael Kühl, 2012. "The cross-country importance of global sentiments—evidence for smaller EU countries," International Economics and Economic Policy, Springer, vol. 9(3), pages 245-264, September.
    5. Zribi, Wissal & Boufateh, Talel & Lahouel, Bechir Ben & Urom, Christian, 2024. "Uncertainty shocks, investor sentiment and environmental performance: Novel evidence from a PVAR approach," International Review of Financial Analysis, Elsevier, vol. 93(C).
    6. Boubakri, Salem & Couharde, Cécile & Raymond, Hélène, 2016. "Effects of financial turmoil on financial integration and risk premia in emerging markets," Journal of Empirical Finance, Elsevier, vol. 38(PA), pages 120-138.
    7. Di, Li & Shaiban, Mohammed Sharaf & Hasanov, Akram Shavkatovich, 2021. "The power of investor sentiment in explaining bank stock performance: Listed conventional vs. Islamic banks," Pacific-Basin Finance Journal, Elsevier, vol. 66(C).
    8. Joscha Beckmann & Ansgar Belke & Robert Czudaj, 2015. "Productivity Shocks and Real Effective Exchange Rates," Review of Development Economics, Wiley Blackwell, vol. 19(3), pages 502-515, August.
    9. Dash, Saumya Ranjan & Maitra, Debasish, 2019. "The relationship between emerging and developed market sentiment: A wavelet-based time-frequency analysis," Journal of Behavioral and Experimental Finance, Elsevier, vol. 22(C), pages 135-150.
    10. Milena - Jana Schank, 2016. "The Impact of Economic Sentiments on Foreign Direct Investments," Ovidius University Annals, Economic Sciences Series, Ovidius University of Constantza, Faculty of Economic Sciences, vol. 0(2), pages 605-610, February.
    11. Mariem Talbi & Amel Ben Halima, 2019. "Global Contagion of Investor Sentiment during the US Subprime Crisis: The Case of the USA and the Region of Latin America," International Journal of Economics and Financial Issues, Econjournals, vol. 9(3), pages 163-174.
    12. Cagliesi, Gabriella & Guidi, Francesco, 2021. "A three-tiered nested analytical approach to financial integration: The case of emerging and frontier equity markets," International Review of Financial Analysis, Elsevier, vol. 74(C).
    13. Jana Juriová, 2015. "The role of foreign sentiment in small open economy," International Journal of Economic Sciences, International Institute of Social and Economic Sciences, vol. 4(2), pages 57-68, June.
    14. He, Zhifang & Sun, Hao & Chen, Jiaqi & Yang, Xin & Yin, Zhujia, 2023. "Dynamic interaction of risk–return trade-offs between oil market and China’s stock market: An analysis from the risk preferences perspective," The North American Journal of Economics and Finance, Elsevier, vol. 67(C).
    15. Nektarios Michail & Christos Savva & Demetris Koursaros, 2018. "Effects of fiscal consolidation on business confidence in the Euro Area," Economics and Business Letters, Oviedo University Press, vol. 7(2), pages 76-83.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. repec:zbw:rwirep:0174 is not listed on IDEAS
    2. Ansgar Belke & Joscha Beckmann & Michael Kühl, 2010. "Global Integration of Central and Eastern European Financial Markets – The Role of Economic Sentiments," Ruhr Economic Papers 0174, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.
    3. Joscha Beckmann & Ansgar Belke & Michael Kühl, 2012. "The cross-country importance of global sentiments—evidence for smaller EU countries," International Economics and Economic Policy, Springer, vol. 9(3), pages 245-264, September.
    4. Eleni Zafeiriou & Constantinos Katrakilidis & Chrysanthi Pegiou, 2019. "Consumer Confidence on Heating Oil Prices: An Empirical Study of their Relationship for European Union in a Nonlinear Framework," European Research Studies Journal, European Research Studies Journal, vol. 0(1), pages 63-90.
    5. Erik Kole & Liesbeth Noordegraaf-Eelens & Bas Vringer, 2019. "Cognitive Biases and Consumer Sentiment," Tinbergen Institute Discussion Papers 19-031/I, Tinbergen Institute, revised 21 Mar 2023.
    6. Christian Dreger & Konstantin Arkadievich Kholodilin, 2013. "Forecasting Private Consumption by Consumer Surveys," Journal of Forecasting, John Wiley & Sons, Ltd., vol. 32(1), pages 10-18, January.
    7. Christos Kallandranis & Socrates Karidis, 2014. "Assessing the Effect of the Consumer-Voter Sentiment on Tiebout-Like Migration: The EU 27 Case," Global Economy Journal (GEJ), World Scientific Publishing Co. Pte. Ltd., vol. 14(1), pages 31-55, April.
    8. Stephane Dees & Pedro Soares Brinca, 2013. "Consumer confidence as a predictor of consumption spending: Evidence for the United States and the Euro area," International Economics, CEPII research center, issue 134, pages 1-14.
    9. Chen, Zhongdong & Daves, Phillip R., 2018. "The January sentiment effect in the U.S. stock market," International Review of Financial Analysis, Elsevier, vol. 59(C), pages 94-104.
    10. Salhin, Ahmed & Sherif, Mohamed & Jones, Edward, 2016. "Managerial sentiment, consumer confidence and sector returns," International Review of Financial Analysis, Elsevier, vol. 47(C), pages 24-38.
    11. Dudek, Sławomir, 2008. "Consumer Survey Data and short-term forecasting of households consumption expenditures in Poland," MPRA Paper 19818, University Library of Munich, Germany.
    12. Merella, Vincenzo & Satchell, Stephen E., 2022. "By force of confidence," European Economic Review, Elsevier, vol. 150(C).
    13. Gric, Zuzana & Ehrenbergerova, Dominika & Hodula, Martin, 2022. "The power of sentiment: Irrational beliefs of households and consumer loan dynamics," Journal of Financial Stability, Elsevier, vol. 59(C).
    14. Vosen, Simeon & Schmidt, Torsten, 2012. "A monthly consumption indicator for Germany based on Internet search query data," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 19(7), pages 683-687.
    15. Juhro, Solikin M. & Iyke, Bernard Njindan, 2020. "Consumer confidence and consumption expenditure in Indonesia," Economic Modelling, Elsevier, vol. 89(C), pages 367-377.
    16. Kajal Lahiri & Yongchen Zhao, 2016. "Determinants of Consumer Sentiment Over Business Cycles: Evidence from the US Surveys of Consumers," Journal of Business Cycle Research, Springer;Centre for International Research on Economic Tendency Surveys (CIRET), vol. 12(2), pages 187-215, December.
    17. Galariotis, Emilios & Makrichoriti, Panagiota & Spyrou, Spyros, 2018. "The impact of conventional and unconventional monetary policy on expectations and sentiment," Journal of Banking & Finance, Elsevier, vol. 86(C), pages 1-20.
    18. Anastasiou, Dimitris & Kallandranis, Christos & Drakos, Konstantinos, 2022. "Borrower discouragement prevalence for Eurozone SMEs: Investigating the impact of economic sentiment," Journal of Economic Behavior & Organization, Elsevier, vol. 194(C), pages 161-171.
    19. Brigitte Desroches & Marc‐André Gosselin, 2004. "Evaluating Threshold Effects in Consumer Sentiment," Southern Economic Journal, John Wiley & Sons, vol. 70(4), pages 942-952, April.
    20. Guzman, Giselle C., 2008. "Using sentiment to predict GDP growth and stock returns," MPRA Paper 36505, University Library of Munich, Germany.
    21. Byrne, Joseph P & Lorusso, Marco & Xu, Bing, 2017. "Oil Prices and Informational Frictions: The Time-Varying Impact of Fundamentals and Expectations," MPRA Paper 80668, University Library of Munich, Germany.

    More about this item

    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • P2 - Political Economy and Comparative Economic Systems - - Socialist and Transition Economies

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:reviec:v:19:y:2011:i:1:p:137-157. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: http://www.blackwellpublishing.com/journal.asp?ref=0965-7576 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.