Financial Integration at Times of Financial Instability
AbstractThis article analyzes the phenomenon of financial integration on both the theoretical and empirical levels, focusing primarily on assessing the impacts of the current financial crisis. In the theoretical section we first look at the definition of financial integration and summarize the benefits and costs associated with this process. We go on to examine the relationship between financial integration and financial instability, emphasizing the priority role of financial innovation. The subsequent empirical section provides an analysis of the speed and level of integration of the Czech financial market and the markets of selected inflation-targeting Central European economies (Hungary and Poland) and advanced Western European economies (Sweden and the United Kingdom) with the euro area. The results for the Czech Republic reveal that a process of increasing financial integration has been going on steadily since the end of the 1990s and also that the financial crisis caused only temporary price divergence of the Czech financial market from the euro area market.
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Bibliographic InfoPaper provided by Czech National Bank, Research Department in its series Working Papers with number 2010/09.
Date of creation: Dec 2010
Date of revision:
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Beta-convergence; financial crisis; financial integration; gamma-convergence; new EU Member States; propagation of shocks; sigma-convergence.;
Other versions of this item:
- 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.
- Jan Babecky & Lubos Komarek & Zlatuse Komarkova, 2010. "Financial Integration at Times of Financial (In)Stability," Occasional Publications - Chapters in Edited Volumes, in: CNB Financial Stability Report 2009/2010, chapter 0, pages 102-109 Czech National Bank, Research Department.
- C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
- G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
- G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-06-18 (All new papers)
- NEP-CBA-2011-06-18 (Central Banking)
- NEP-EEC-2011-06-18 (European Economics)
- NEP-IFN-2011-06-18 (International Finance)
- NEP-MON-2011-06-18 (Monetary Economics)
- NEP-TRA-2011-06-18 (Transition Economics)
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