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Time-Varying Bond Market Integration in EMU

Author

Listed:
  • Gupta, Priyanshi

    (University of Delhi)

  • Sehgal, Sanjay

    (University of Delhi)

  • Deisting, Florent

    (Group ESC Pau)

Abstract

We examine the level and progress of bond market integration amongst the eleven Economic and Monetary Union countries with active bond markets, over normal and crisis periods. The study covers data from January 2002 up to March 2014. We employ seven indicators for assessing integration, namely beta convergence, sigma convergence, variance ratio, Asymmetric Dynamic Conditional Correlation, dynamic co-integration, market synchronisation, and common factors approach. The results suggest that there is no heterogeneity in the integration process of large-sized economies and medium-sized economies, thereby restricting portfolio diversification potential. Further, bond market integration in the Economic and Monetary Union deteriorated during the crisis period, especially during the European debt crisis, with the economies of Greece, Ireland, Italy, Portugal, and Spain being the worst affected. We observe that bond markets take a lead in information linkages vis-à-vis stock markets, and hence should get precedence in policy intervention relating to market integration, development, and crisis management.

Suggested Citation

  • Gupta, Priyanshi & Sehgal, Sanjay & Deisting, Florent, 2015. "Time-Varying Bond Market Integration in EMU," Journal of Economic Integration, Center for Economic Integration, Sejong University, vol. 30(4), pages 708-760.
    • Handle: RePEc:ris:integr:0674
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    References listed on IDEAS

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    Cited by:

    1. Sanjay Sehgal & Piyush Pandey & Florent Deisting, 2018. "Time varying integration amongst the South Asian equity markets: An empirical study," Cogent Economics & Finance, Taylor & Francis Journals, vol. 6(1), pages 1452328-145, January.
    2. Sanjay Sehgal & Piyush Pandey & Florent Deisting, 2018. "Stock Market Integration Dynamics and its Determinants in the East Asian Economic Community Region," Journal of Quantitative Economics, Springer;The Indian Econometric Society (TIES), vol. 16(2), pages 389-425, June.
    3. Sanjay Sehgal & Piyush Pandey & Florent Deisting, 2018. "Time varying integration amongst the South Asian equity markets: An empirical study," Cogent Economics & Finance, Taylor & Francis Journals, vol. 6(1), pages 1452328-145, January.
    4. Priyanshi Gupta & Sanjay Sehgal, 2020. "Convergence of retail banking interest rates to households in euro area: time-varying measurement and determinants," International Economics and Economic Policy, Springer, vol. 17(1), pages 25-65, February.

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    More about this item

    Keywords

    Bond Market Linkages; EMU Countries; Global Financial Crisis; European Debt Crisis; Time-varying Financial Integration;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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