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Modelling change in financial market integration

Author

Listed:
  • Nektarios Aslanides
  • Mardi Dungey
  • Christos S. Savva

Abstract

This paper measures the increase in stock market integration between the three largest new EU members (Hungary, the Czech Republic and Poland) and the Euro-zone. To achieve this we develop a new model where smooth transition conditional correlation (STCC) models with fat tails, spillovers, volatility clustering, and asymmetric volatility effects (GJRGARCH) are embedded in a single VAR. The specification is directly compared the dynamic conditional correlation (DCC) model of Engle (2002). The results show evidence of financial integration with the EMU in each of the three countries with a considerable increase in correlations in 2006. Tests for a common transition structure of the three markets with the Euro-zone are rejected, due to the differing behaviour of the Czech Republic data.

Suggested Citation

  • Nektarios Aslanides & Mardi Dungey & Christos S. Savva, 2009. "Modelling change in financial market integration," CAMA Working Papers 2009-07, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
    • Handle: RePEc:een:camaaa:2009-07
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    File URL: https://cama.crawford.anu.edu.au/sites/default/files/publication/cama_crawford_anu_edu_au/2021-06/7_aslanidis_dungey_savva_2009.pdf
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    More about this item

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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