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How did the Sovereign debt crisis affect the Euro financial integration? A fractional cointegration approach

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  • José Carlos Vides

    (University of Huelva)

  • Antonio A. Golpe

    (University of Huelva)

  • Jesús Iglesias

    (University of Seville)

Abstract

This paper examines financial integration among stock markets in the Eurozone using the prices from each stock index. Monthly time series are constructed for four major stock indices for the period between 1998 and 2016. A fractional cointegrated vector autoregressive model is estimated at an international level. Our results show that there is a perfect and complete Euro financial integration. Considering the possible existence of structural breaks, this paper also examines the fractional cointegration within each regime, showing that Euro financial integration is very robust. However, in the financial and sovereign debt crisis regime, IBEX 35 appears to be the weak link in Euro financial integration, unless Euro financial integration recovers when this period ends.

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  • José Carlos Vides & Antonio A. Golpe & Jesús Iglesias, 2018. "How did the Sovereign debt crisis affect the Euro financial integration? A fractional cointegration approach," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 45(4), pages 685-706, November.
    • Handle: RePEc:kap:empiri:v:45:y:2018:i:4:d:10.1007_s10663-017-9386-2
    DOI: 10.1007/s10663-017-9386-2
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    Cited by:

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    2. Zhao, Yuting, 2020. "Research and development of economic crisis data simulation teaching analysis system based on fractional calculus equation," Chaos, Solitons & Fractals, Elsevier, vol. 130(C).
    3. Gabriella Chiesa & José Manuel Mansilla-Fernández, 2021. "The dynamic effects of non-performing loans on banks’ cost of capital and lending supply in the Eurozone," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 48(2), pages 397-427, May.

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    More about this item

    Keywords

    Fractional cointegration; Eurozone; Financial integration; Financial market cointegration;
    All these keywords.

    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
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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