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Does Europe have an integrated capital market? Evidence from real interest parity tests

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  • Imad Moosa
  • Razzaque Bhatti

Abstract

Empirical evidence on capital market integration in Europe is presented by testing for mean reversion in the real interest differentials of seven European countries vis-a-vis Germany. The tests overwhelmingly reject the null hypothesis of random walk in the real interest rate differentials, implying that capital and goods markets have become integrated in the countries considered.

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  • Imad Moosa & Razzaque Bhatti, 1996. "Does Europe have an integrated capital market? Evidence from real interest parity tests," Applied Economics Letters, Taylor & Francis Journals, vol. 3(8), pages 517-520.
    • Handle: RePEc:taf:apeclt:v:3:y:1996:i:8:p:517-520
    DOI: 10.1080/135048596356140
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    Cited by:

    1. Shaista Alam & Muhammad Sabihuddin Butt & Azhar Iqbal, 2001. "The Long-run Relationship between Real Exchange Rate and Real Interest Rate in Asian Countries: An Application of Panel Cointegration," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 40(4), pages 577-602.
    2. Chan, Tze-Haw, 2012. "Assessing the international parity conditions and transmission mechanism for Malaysia-China," MPRA Paper 38930, University Library of Munich, Germany.
    3. Abdullah Gulcu & Dilem Yildirim, 2018. "Smooth Breaks And Nonlinear Mean Reversion In Real Interest Parity: Evidence From East Asian Countries," ERC Working Papers 1804, ERC - Economic Research Center, Middle East Technical University, revised Feb 2018.
    4. Chan Tze Haw & Khong Wye Leong Roy & Zubaidi Baharumshah, 2003. "Dynamic Financial Linkages of Japan And Asean Economies: An Application of Real Interest Parity," Capital Markets Review, Malaysian Finance Association, vol. 11(1&2), pages 23-40.
    5. Ahmad Zubaidi Baharumshah & Chan Tze Haw & A.Mansur M. Masih & Evan Lau, 2011. "Financial integration of East Asian economies: evidence from real interest parity," Applied Economics, Taylor & Francis Journals, vol. 43(16), pages 1979-1990.
    6. Baharumshah, Ahmad Zubaidi & Soon, Siew-Voon & Boršič, Darja, 2013. "Real interest parity in Central and Eastern European countries: Evidence on integration into EU and the US markets," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 25(C), pages 163-180.
    7. Chan, Tze-Haw, 2008. "International Parities among China and Her Major Trading Partners in Asia Pacific," MPRA Paper 15504, University Library of Munich, Germany, revised 06 Apr 2009.
    8. Chan, Tze-Haw, 2002. "Dynamic financial linkages among the Asia Pacific economies: an empirical assessment of real interest parity condition," MPRA Paper 34642, University Library of Munich, Germany.
    9. Junttila, Juha, 2001. "Testing an Augmented Fisher Hypothesis for a Small Open Economy: The Case of Finland," Journal of Macroeconomics, Elsevier, vol. 23(4), pages 577-599, October.

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