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Financial Integration of Stock Markets among New EU Member States and the Euro Area

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  • Ian Babetskii
  • Lubos Komarek
  • Zlatuse Komarkova

Abstract

The paper considers the empirical dimension of financial integration among stock markets in four new European Union member states (the Czech Republic, Hungary, Poland and Slovakia) in comparison with the euro area. The main objective is to test for the existence and determine the degree of the four states’ financial integration relative to the euro currency union. The analysis is performed at the country level (using national stock exchange indices) and at the sectoral level (considering banking, chemical, electricity and telecommunication indices). Our empirical evaluation consists of (1) an analysis of alignment (by means of standard and rolling correlation analysis) to outline the overall pattern of integration; (2) the application of the concept of beta convergence (through the use of time series, panel and state-space techniques) to identify the speed of integration; and (3) the application of so-called sigma convergence to measure the degree of integration. We find evidence of stock market integration on both the national and sectoral levels between the Czech Republic, Hungary, Poland and the euro area.

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Bibliographic Info

Paper provided by Czech National Bank, Research Department in its series Working Papers with number 2007/7.

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Date of creation: Dec 2007
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Handle: RePEc:cnb:wpaper:2007/7

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Keywords: Beta convergence; new EU member states; sigma convergence; stock markets.;

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Citations

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Cited by:
  1. Tausch, Arno, 2013. "The hallmarks of crisis. A new center-periphery perspective on long cycles," MPRA Paper 48356, University Library of Munich, Germany.
  2. Jan Babecky & Sofia Bauducco & Ales Bulir & Martin Cihak & Petr Jakubik & Lubos Komarek & Zlata Komarkova & Jiri Podpiera & Christian Schmieder & Laurent Weill, 2009. "CNB Economic Research Bulletin: Financial and Global Stability Issues," Occasional Publications - Edited Volumes, Czech National Bank, Research Department, edition 2, volume 7, number rb07/2 edited by Jan Babecky & Jan Frait, August.
  3. Jan Babecky & Oxana Babetskaia-Kukharchuk & Kamil Galuscak & Dana Hajkova & Jaroslav Hermanek & Tomas Holub & Roman Horvath & Petr Jakubik & Lubos Komarek & Zlatuse Komarkova & Petr Kral & Filip Novot, 2008. "Analyses of the Czech Republic's Current Economic Alignment with the Euro Area 2008," Occasional Publications - Edited Volumes, Czech National Bank, Research Department, number as08 edited by Dana Hajkova, August.
  4. repec:ecu:wpaper:2010-01 is not listed on IDEAS
  5. repec:prg:jnlpep:v:2013:y:2013:i:4:id:434:p:450-469 is not listed on IDEAS
  6. Vodova, Pavla, 2012. "Price Indicators as a Measure of Credit Market Integration in the Visegrad Countries," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(1), pages 62-73, March.
  7. Jan Babecky & Lubos Komarek & Zlatuse Komarkova, 2013. "Financial Integration at Times of Financial Instability," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 63(1), pages 25-45, March.
  8. Roman Horvath & Dragan Petrovski, 2012. "International Stock Market Integration : Central and South Eastern Europe Compared," Working Papers 317, Institut für Ost- und Südosteuropaforschung (Institute for East and South-East European Studies).
  9. Vinokurov, Evgeny, 2010. "The System of Indicators of Eurasian Integration," MPRA Paper 22227, University Library of Munich, Germany.
  10. Václav Žďárek, 2011. "An Empirical Analysis of Price Convergence of the Czech Republic and the New EU Member States towards the Euro Area," Politická ekonomie, University of Economics, Prague, vol. 2011(4), pages 454-474.
  11. Anita Radman Peša & Mejra Festić, 2012. "Testing the “EU Announcement Effect” on Stock Market Indices and Macroeconomic Variables in Croatia Between 2000 and 2010," Prague Economic Papers, University of Economics, Prague, vol. 2012(4), pages 450-469.
  12. Avadanei, Andreea, 2011. "Indicatori de măsurare a integrării financiare europene. Literature review
    [Measuring European financial market integration. A literature review]
    ," MPRA Paper 28737, University Library of Munich, Germany.
  13. Vinokurov, Evgeny, 2009. "Systema Indikatorov Evraziyskoy Integracii
    [The System of Indicators of Eurasian Integration]
    ," MPRA Paper 20914, University Library of Munich, Germany.
  14. Tigran Poghosyan, 2009. "Are “new” and “old” EU members becoming more financially integrated? A threshold cointegration analysis," International Economics and Economic Policy, Springer, vol. 6(3), pages 259-281, October.
  15. Dragan Tevdovski, 2014. "Extreme negative coexceedances in South Eastern European stock markets," CREATES Research Papers 2014-18, School of Economics and Management, University of Aarhus.
  16. Babeckii, Ian & Komárek, Luboš & Komárková, Zlatuše, 2012. "Integration of Chinese and Russian stock markets with world markets: National and sectoral perspectives," BOFIT Discussion Papers 4/2012, Bank of Finland, Institute for Economies in Transition.
  17. Mikhail Stolbov, 2014. "How Are Interbank and Sovereign Debt Markets Linked? Evidence from 14 OECD Countries, the Euro Area and Russia," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 61(3), pages 331-348, June.
  18. repec:ebl:ecbull:v:7:y:2008:i:14:p:1-12 is not listed on IDEAS
  19. Pirovano, Mara, 2012. "Monetary policy and stock prices in small open economies: Empirical evidence for the new EU member states," Economic Systems, Elsevier, vol. 36(3), pages 372-390.
  20. Alenka Kavkler & Mejra Festić, 2011. "Modelling Stock Exchange Index Returns in Different GDP Growth Regimes," Prague Economic Papers, University of Economics, Prague, vol. 2011(1), pages 3-22.

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