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Financial integration and currency risk premium in CEECs: Evidence from the ICAPM

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  • Boubakri, Salem
  • Guillaumin, Cyriac

Abstract

This paper aims to study the Central and Eastern European Countries' (CEECs) dynamics of financial integration in the euro area with the prospect of their integration into the European Monetary Union. Our empirical analysis is based, successively, on a MGARCH model with time-varying correlations, a state-space model and a Markov-switching model. The results show that financial integration (i) is not perfect but is increasing and (ii) is linked to currency stability. The growing financial integration in 2007–2009 seems to be rather the result of the shock propagated by the global crisis.

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Bibliographic Info

Article provided by Elsevier in its journal Emerging Markets Review.

Volume (Year): 12 (2011)
Issue (Month): 4 ()
Pages: 460-484

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Handle: RePEc:eee:ememar:v:12:y:2011:i:4:p:460-484

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Web page: http://www.elsevier.com/locate/inca/620356

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Keywords: CEECs; Euro area; Currency risk premium; Financial integration; International Capital Asset Pricing Model (ICAPM);

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References

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Citations

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Cited by:
  1. Vít Pošta, 2012. "Estimation of the Time-Varying Risk Premium in the Czech Foreign Exchange Market," Prague Economic Papers, University of Economics, Prague, vol. 2012(1), pages 3-17.
  2. Urbański, Stanisław, 2012. "Multifactor explanations of returns on the Warsaw Stock Exchange in light of the ICAPM," Economic Systems, Elsevier, vol. 36(4), pages 552-570.
  3. Vit Posta, 2012. "Time-Varying Risk Premium in the Czech Capital Market: Did the Market Experience a Structural Shock in 2008–2009?," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 62(5), pages 450-470, November.

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