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Financial integration before and after the crisis: Euler equations (re)visit European Union

Author

Listed:
  • Tomislav Globan

    (Faculty of Economics and Business, University of Zagreb)

  • Petar Sorić

    (Faculty of Economics and Business, University of Zagreb)

Abstract

This paper offers one of the rare applications of various types of Euler equation tests to estimate the degree of financial integration of 28 EU countries with the Eurozone. The analysis is done separately for risk-free and risky assets in three types of financial markets (bond, stock and money markets). In order to examine whether the recent crisis impacted the levels of financial integration in EU member states, all models were estimated for the entire period of known quarterly data (1995-2014), as well as for the pre-crisis period only. We construct an Euler integration index (EII) that measures the integration level of countries across financial markets and show that the old member states (OMS) recorded higher integration levels than the new member states (NMS) in the pre-crisis period, while the crisis considerably decreased the gap, resulting even with NMS surpassing the OMS in EII values.

Suggested Citation

  • Tomislav Globan & Petar Sorić, 2017. "Financial integration before and after the crisis: Euler equations (re)visit European Union," EFZG Working Papers Series 1702, Faculty of Economics and Business, University of Zagreb.
    • Handle: RePEc:zag:wpaper:1702
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    References listed on IDEAS

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    1. Oussama Tilfani & Paulo Ferreira & Andreia Dionisio & My Youssef El Boukfaoui, 2020. "EU Stock Markets vs. Germany, UK and US: Analysis of Dynamic Comovements Using Time-Varying DCCA Correlation Coefficients," JRFM, MDPI, vol. 13(5), pages 1-23, May.

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    More about this item

    Keywords

    consumption; crisis; Euler equation; European Union; financial integration;
    All these keywords.

    JEL classification:

    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • F15 - International Economics - - Trade - - - Economic Integration
    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration

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