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Price- and News-Based Measures of Financial Integration among New EU Member States and the Euro Area

In: Money, Banking and Financial Markets in Central and Eastern Europe

Author

Listed:
  • J. Babecký
  • J. Frait
  • L. Komárek
  • Z. Komárková

Abstract

In a monetary union, the integration of financial markets (e.g., money, foreign exchange, bond, and equity markets) plays a key role in assuring the effective transmission of common monetary policy. The importance of conducting an assessment of the degree of financial integration across the euro area member countries is stressed by both central banks and academic institutions — see, among others, Trichet (2008, 2007, 2006, 2005), Papademos (2008a, 2008b), and Yam (2006). The more integrated financial markets are, the more effectively monetary policy is transmitted through the financial system, particularly within the European monetary union. As financial markets expand, their fluctuations have stronger effects on real economic variables such as private consumption. Thus, along with a number of benefits, financial integration brings certain costs. It is widely believed that the benefits outweigh the costs, provided that mechanisms for controlling for financial stability are implemented.1

Suggested Citation

  • J. Babecký & J. Frait & L. Komárek & Z. Komárková, 2010. "Price- and News-Based Measures of Financial Integration among New EU Member States and the Euro Area," Palgrave Macmillan Studies in Banking and Financial Institutions, in: Roman Matousek (ed.), Money, Banking and Financial Markets in Central and Eastern Europe, chapter 8, pages 161-178, Palgrave Macmillan.
    • Handle: RePEc:pal:pmschp:978-0-230-30221-1_8
    DOI: 10.1057/9780230302211_8
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    Cited by:

    1. Caporale, Guglielmo Maria & You, Kefei & Chen, Lei, 2019. "Global and regional stock market integration in Asia: A panel convergence approach," International Review of Financial Analysis, Elsevier, vol. 65(C).

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