Global Integration of Central and Eastern European Financial Markets – The Role of Economic Sentiments
AbstractThis paper examines the importance of diff erent economic sentiments, e.g. consumer moods, for the Central and Eastern European countries (CEECs) during the transition process. We fi rst analyze the importance of economic confi dence with respect to the CEECs’ fi nancial markets. Since the integration of formerly strongly-regulated markets into global markets can also lead to an increase in the dependence of the CEECs’ domestic market performance on global sentiments, we also investigate the relationship between global economic sentiments and domestic income and share prices. Finally, we test whether the impact of global sentiments and stock prices on domestic variables increases proportionally with the degree of integration. We also account for eff ects stemming from global income. For these purposes, we apply a restricted cointegrating VAR (CVAR) framework based upon a restricted autoregressive model which allows us to distinguish between the long-run and the short-run dynamics. For the long run we fi nd evidence supporting relationships between sentiments, income and share prices in the case of the Czech Republic. Our results for the short run suggest that economic sentiments in general are infl uenced by share prices but also off er some predictive power with respect to the latter. What is more, European sentiments play an important role in particular for the CEECs’ share prices and income. The signifi cance of this link increases with economic integration.
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Bibliographic InfoPaper provided by Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen in its series Ruhr Economic Papers with number 0174.
Length: 37 pages
Date of creation: Mar 2010
Date of revision:
Other versions of this item:
- Joscha Beckmann & Ansgar Belke & Michael Kühl, 2011. "Global Integration of Central and Eastern European Financial Markets—The Role of Economic Sentiments," Review of International Economics, Wiley Blackwell, vol. 19(1), pages 137-157, 02.
- Ansgar Belke & Joscha Beckmann & Michael Kühl, 2009. "Global Integration of Central and Eastern European Financial Markets: The Role of Economic Sentiments," Discussion Papers of DIW Berlin 952, DIW Berlin, German Institute for Economic Research.
- E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
- G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
- P2 - Economic Systems - - Socialist Systems and Transition Economies
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-04-04 (All new papers)
- NEP-EEC-2010-04-04 (European Economics)
- NEP-MAC-2010-04-04 (Macroeconomics)
- NEP-TRA-2010-04-04 (Transition Economics)
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