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Financial integration, GDP correlation and the endogeneity of optimum currency areas

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Author Info
Stefano Schiavo () (University of Trento)

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Abstract

The paper analyzes the relationship between trade, financial integration and business cycle synchronization in the euro area. The introduction of the euro has had a noticeable impact on European financial markets: we find evidence that capital markets integration exerts a positive effect on output correlation. This in turn has two major implications. First, it corroborates the hypothesis of the endogeneity of optimum currency areas, whereby after joining a monetary union countries fit better standard OCA criteria; second, it provides European policymakers with yet another reason to purse financial integration in the euro area (and in prospective members as well).

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File URL: http://dse.univr.it/RePEc/ver/Wpaper/WP25.pdf
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Publisher Info
Paper provided by Università di Verona, Dipartimento di Scienze economiche in its series Working Papers with number 25.

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Length: 43
Date of creation: Sep 2005
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Handle: RePEc:ver:wpaper:25

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Related research
Keywords: business cycle; EMU; endogeneity; integration; optimum currency areas;

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Find related papers by JEL classification:
E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration

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References listed on IDEAS
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Cited by:
(explanations, 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.)

  1. Goggin, Jean & Siedschlag, Iulia, 2009. "International Transmission of Business Cycles Between Ireland and its Trading Partners," Papers WP279, Economic and Social Research Institute (ESRI). [Downloadable!]
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