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How Has the European Monetary Integration Process Contributed to Regional Financial Market Integration?

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  • Reszat, Beate

Abstract

European monetary integration was one element in the process of financial market integration but by far not the only one. The paper traces the development of financial markets and systems in Europe from the beginnings of the euromarkets in the 1950s over early exchange rate arrangements and the establishment of the Single Market program to the launch of the euro and its effects. Not surprisingly, the contribution of the common currency to financial integration has been the stronger the more national markets have in common and the greater the importance of currency risk as discriminating factor. It has been most successful in the interbank market for very short-term unsecured deposits and in markets for bonds and derivatives, and played a lesser role for collateralised instruments and equities where differences in institutions and systems as well as cultural aspects impose stronger impediments. Experience has shown that in the process of financial integration a common currency is no substitute for the removal of institutional barriers and other obstacles hindering the free move of financial institutions and services. And, it cannot compensate for the specific information about individuals, firms and products required in some market segments that is a lasting impediment to full integration.

Suggested Citation

  • Reszat, Beate, 2003. "How Has the European Monetary Integration Process Contributed to Regional Financial Market Integration?," Discussion Paper Series 26179, Hamburg Institute of International Economics.
    • Handle: RePEc:ags:hwwadp:26179
    DOI: 10.22004/ag.econ.26179
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    File URL: https://ageconsearch.umn.edu/record/26179/files/dp030221.pdf
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    References listed on IDEAS

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    1. Huizinga, Harry & Nicodeme, Gaetan, 2006. "Deposit insurance and international bank liabilities," Journal of Banking & Finance, Elsevier, vol. 30(3), pages 965-987, March.
    2. John Kiff & Ron Morrow, 2000. "Credit Derivatives," Bank of Canada Review, Bank of Canada, vol. 2000(Autumn), pages 3-11.
    3. Harry Huizinga & Gaëtan Nicodème, 2002. "Deposit insurance and international bank deposits," European Economy - Economic Papers 2008 - 2015 164, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
    4. James J. McAndrews & Chris Stefanadis, 2002. "The consolidation of European stock exchanges," Current Issues in Economics and Finance, Federal Reserve Bank of New York, vol. 8(Jun).
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    Cited by:

    1. Alexandra Horobet & Sorin Dumitrescu, 2011. "Time-varying Diversification Benefits: The Impact of Capital Market Integration on European Portfolio Holdings," Chapters, in: Wim Meeusen (ed.),The Economic Crisis and European Integration, chapter 13, Edward Elgar Publishing.
    2. Horobet, Alexandra & Lupu, Radu, 2009. "Are Capital Markets Integrated? A Test of Information Transmission within the European Union," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 6(2), pages 64-80, June.
    3. Albu, Lucian Liviu & Lupu, Radu & Calin, Cantemir, 2014. "A Nonlinear Model to Estimate the Long Term Correlation between Market Capitalization and GDP per capita in Eastern EU Countries," Working Papers of Institute for Economic Forecasting 141115, Institute for Economic Forecasting.
    4. Horobet, Alexandra & Ilie, Livia, 2007. "Regulation versus Competition on European Financial Markets," MPRA Paper 6133, University Library of Munich, Germany.
    5. Wim Meeusen (ed.), 2011. "The Economic Crisis and European Integration," Books, Edward Elgar Publishing, number 14130, February.

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    Keywords

    Financial Economics;

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