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Financial Integration at Times of Financial Instability

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  • Jan Babecky
  • Lubos Komarek
  • Zlatuse Komarkova

Abstract

This article analyzes the phenomenon of financial integration on both the theoretical and empirical levels, focusing primarily on assessing the impacts of the current financial crisis. In the theoretical section we first look at the definition of financial integration and summarize the benefits and costs associated with this process. We go on to examine the relationship between financial integration and financial instability, emphasizing the priority role of financial innovation. The subsequent empirical section provides an analysis of the speed and level of integration of the Czech financial market and the markets of selected inflation-targeting Central European economies (Hungary and Poland) and advanced Western European economies (Sweden and the United Kingdom) with the euro area. The results for the Czech Republic reveal that a process of increasing financial integration has been going on steadily since the end of the 1990s and also that the financial crisis caused only temporary price divergence of the Czech financial market from the euro area market.

Suggested Citation

  • Jan Babecky & Lubos Komarek & Zlatuse Komarkova, 2010. "Financial Integration at Times of Financial Instability," Working Papers 2010/09, Czech National Bank.
  • Handle: RePEc:cnb:wpaper:2010/09
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    Cited by:

    1. Robert Ambrisko & Vitezslav Augusta & Jan Babecky & Michal Franta & Dana Hajkova & Petr Kral & Jan Libich & Pavla Netusilova & Milan Rikovsky & Jakub Rysanek & Pavel Soukup & Petr Stehlik & Vilem Vale, 2013. "Macroeconomic Effects of Fiscal Policy," Occasional Publications - Edited Volumes, Czech National Bank, edition 2, volume 11, number rb11/2 edited by Jan Babecky & Kamil Galuscak, March.
    2. Jan Babecky & Alena Bicakova & Alexis Derviz & Tomas Havranek & Roman Horvath & Lubos Komarek & Zlatuse Komarkova & Jakub Mateju & Ke Pang & Renata Pasalicova & Zuzana Prelcova & Marie Rakova & Pierre, 2011. "Macro-Financial Linkages: Theory and Applications," Occasional Publications - Edited Volumes, Czech National Bank, edition 2, volume 9, number rb09/2 edited by Jan Babecky, March.
    3. Motelle, Sephooko & Biekpe, Nicholas, 2015. "Financial integration and stability in the Southern African development community," Journal of Economics and Business, Elsevier, vol. 79(C), pages 100-117.
    4. Alexey Yurievich Mikhaylov, 2018. "Volatility Spillover Effect between Stock and Exchange Rate in Oil Exporting Countries," International Journal of Energy Economics and Policy, Econjournals, vol. 8(3), pages 321-326.
    5. Baumöhl, Eduard, 2013. "Stock market integration between the CEE-4 and the G7 markets: Asymmetric DCC and smooth transition approach," MPRA Paper 43834, University Library of Munich, Germany.
    6. Peter Claeys & Borek Vašícek, 2012. "“Measuring Sovereign Bond Spillover in Europe and the Impact of Rating News”," IREA Working Papers 201219, University of Barcelona, Research Institute of Applied Economics, revised Nov 2012.
    7. Frantisek Brazdik & Jan Bruha & Michal Franta & David Havrlant & Tibor Hledik & Tomas Holub & Zuzana Humplova & Frantisek Kopriva & Jiri Polansky & Marek Rusnak & Jaromir Tonner, 2015. "Forecasting," Occasional Publications - Edited Volumes, Czech National Bank, edition 1, volume 13, number rb13/1 edited by Jan Babecky & Kamil Galuscak, March.
    8. Hoffmann, Peter & Kremer, Manfred & Zaharia, Sonia, 2020. "Financial integration in Europe through the lens of composite indicators," Economics Letters, Elsevier, vol. 194(C).
    9. Hamid Baghestani & Liliana Danila, 2014. "Interest Rate and Exchange Rate Forecasting in the Czech Republic: Do Analysts Know Better than a Random Walk?," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 64(4), pages 282-295, September.
    10. Kamil Galuscak & Adam Gersl & Marcela Gronychova & Petr Hlavac & Petr Jakubik & Lubos Komarek & Zlatuse Komarkova & Tomas Konecny & Jakub Seidler, 2014. "Stress-Testing Analyses of the Czech Financial System," Occasional Publications - Edited Volumes, Czech National Bank, edition 1, volume 12, number rb12/1 edited by Jan Babecky & Roman Horvath, March.
    11. Michal Adam & Piotr Banbula & Michal Markun, 2015. "International Dependence and Contagion across Asset Classes: The Case of Poland," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 65(3), pages 254-270, May.
    12. Oxana Babecka Kucharcukova & Alexis Derviz & Vaclav Hausenblas & Michal Hlavacek & Mark Joy & Narcisa Kadlcakova & Lubos Komarek & Zlatuse Komarkova & Tomas Konecny & Ivana Kubicova & Jitka Lesanovska, 2014. "Macroprudential Research: Selected Issues," Occasional Publications - Edited Volumes, Czech National Bank, edition 2, volume 12, number rb12/2 edited by Jan Babecky & Borek Vasicek, March.
    13. Eduard Baumöhl & Štefan Lyócsa, 2014. "Risk-Return Convergence in CEE Stock Markets: Structural Breaks and Market Volatility," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 64(5), pages 352-373, November.
    14. Anthony Msafiri Nyangarika & Alexey Yurievich Mikhaylov & Bao-jun Tang, 2018. "Correlation of Oil Prices and Gross Domestic Product in Oil Producing Countries," International Journal of Energy Economics and Policy, Econjournals, vol. 8(5), pages 42-48.
    15. Michal Andrle & Oxana Babecka Kucharcukova & Jaromir Baxa & Jan Bruha & Peter Claeys & Jan Filacek & Jakub Mateju & Miroslav Plasil & Serhat Solmaz & Borek Vasicek, 2015. "Monetary Policy Challenges in a Low-Inflation Environment," Occasional Publications - Edited Volumes, Czech National Bank, edition 2, volume 13, number rb13/2 edited by Jan Babecky & Michal Franta, March.
    16. Radoslaw Kurach, 2011. "Eurozone stock returns co-movement: Some findings for portfolio managers and central bankers," Business and Economic Horizons (BEH), Prague Development Center, vol. 5(2), pages 1-12, April.
    17. RNuket Kirci Cevik & Sel Dibooglu & Ali M. Kutan, 2016. "Real and Financial Sector Studies in Central and Eastern Europe: A Review," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 66(1), pages 2-31, February.

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    More about this item

    Keywords

    Beta-convergence; financial crisis; financial integration; gamma-convergence; new EU Member States; propagation of shocks; sigma-convergence.;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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