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EU Accession, Financial Integration, and Contagion Effects: Dynamic Correlation Analysis of CEEC-3 Bond Markets

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  • Lu Yang
  • Shigeyuki Hamori

Abstract

In this paper, we investigate the conditional correlations between the bond markets in CEEC-3 (i.e., Poland, Czech Republic, and Hungary) and Germany from 2000 to 2013 using the asymmetric dynamic conditional correlation model developed by Cappiello et al. (J Financ Econ 4:557–572, 2006 ). CEEC-3 comprise emerging transition economies that became European Union (EU) members in 2004, while Germany serves as a representative of the EU because it is the largest economy in the eurozone. Based on the presented analytical models, we make four important findings. First, we show that financial integration had already evolved before the adoption of the euro in 2004 in the Czech Republic, while the financial integration process continues in Poland but not in Hungary. Second, the bond markets in both Poland and Hungary decreased their dependence on that in Germany during the global financial crisis period. Third, financial contagion did not occur in the bond markets in CEEC-3 and Germany during the European sovereign debt crisis period. Finally, we can observe asymmetric effects on returns over time when markets fluctuate sharply. Copyright CEEUN 2013

Suggested Citation

  • Lu Yang & Shigeyuki Hamori, 2013. "EU Accession, Financial Integration, and Contagion Effects: Dynamic Correlation Analysis of CEEC-3 Bond Markets," Transition Studies Review, Springer;Central Eastern European University Network (CEEUN), vol. 20(2), pages 179-189, October.
    • Handle: RePEc:spr:trstrv:v:20:y:2013:i:2:p:179-189
    DOI: 10.1007/s11300-013-0276-4
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    Cited by:

    1. Iwasaki, Ichiro, 2018. "International Presence of the Japanese Study of Russian and East European Economies," RRC Working Paper Series 74, Russian Research Center, Institute of Economic Research, Hitotsubashi University.
    2. Narcisa Kadlcakova & Lubos Komarek & Zlatuse Komarkova & Michal Hlavacek, 2016. "Identification of Asset Price Misalignments on Financial Markets With Extreme Value Theory," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 52(11), pages 2595-2609, November.
    3. Lu Yang & Jason Z. Ma & Shigeyuki Hamori, 2018. "Dependence Structures and Systemic Risk of Government Securities Markets in Central and Eastern Europe: A CoVaR-Copula Approach," Sustainability, MDPI, vol. 10(2), pages 1-23, January.
    4. Wei Zhou, 2017. "Dynamic and Asymmetric Contagion Reactions of Financial Markets During the Last Subprime Crisis," Computational Economics, Springer;Society for Computational Economics, vol. 50(2), pages 207-230, August.
    5. Tamakoshi, Go & Hamori, Shigeyuki, 2014. "Co-movements among major European exchange rates: A multivariate time-varying asymmetric approach," International Review of Economics & Finance, Elsevier, vol. 31(C), pages 105-113.
    6. Yang, Lu & Hamori, Shigeyuki, 2014. "Dependence structure between CEEC-3 and German government securities markets," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 29(C), pages 109-125.
    7. Yang, Lu & Hamori, Shigeyuki, 2015. "Interdependence between the bond markets of CEEC-3 and Germany: A wavelet coherence analysis," The North American Journal of Economics and Finance, Elsevier, vol. 32(C), pages 124-138.

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    More about this item

    Keywords

    EU accession; Integration; Bond markets; Global financial crisis; E42; F36; G15;
    All these keywords.

    JEL classification:

    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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