Measuring financial integration in the euro area

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Measuring financial integration in the euro area

Author Info

Lieven Baele () (Tilburg University, The Netherlands.)
Annalisa Ferrando () (European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main, Germany.)
Peter Hördahl () (European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main, Germany.)
Elizaveta Krylova () (European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main, Germany.)
Cyril Monnet () (European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main, Germany.)

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Abstract

In this paper, we present a set of specific measures to quantify the state and evolution of financial integration in the euro area. Five key markets are considered, namely the money, corporate bond, government bond, credit and equity markets. Building upon the law of one price, we developed two types of indicators that can be broadly categorised as price-based and news-based measures. We complemented these measures by a number of quantity-based indicators, mainly related to the evolution of the home bias. Results indicate that the unsecured money market is fully integrated, while integration is reasonably high in the government and corporate bond market, as well as in the equity markets. The credit market is among the least integrated, especially in the short-term segment.

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Paper provided by European Central Bank in its series Occasional Paper Series with number 14.

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Length: 48 pages
Date of creation: May 2004
Date of revision:
Handle: RePEc:ecb:ecbops:20040014

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Find related papers by JEL classification:
G12 - Financial Economics - - General Financial Markets - - - Asset Pricing
G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies
G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation

This paper has been announced in the following NEP Reports:

NEP-ALL-2005-12-01 (All new papers)
NEP-EEC-2005-12-01 (European Economics)
NEP-FIN-2005-12-01 (Finance)
NEP-FMK-2005-12-01 (Financial Markets)

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

Adalbert Winkler & Francesco Mazzaferro & Carolin Nerlich & Christian Thimann, 2004. "Official dollarisation/euroisation - motives, features and policy implications of current cases," Occasional Paper Series 11, European Central Bank. [Downloadable!]
Francesco Mazzaferro & Arnaud Mehl & Michael Sturm & Christian Thimann & Adalbert Winkler, 2002. "Economic relations with regions neighbouring the euro area in the ‘euro time zone," Occasional Paper Series 07, European Central Bank. [Downloadable!]

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