Global Integration of Central and Eastern European Financial Markets: The Role of Economic Sentiments
This paper examines the importance of different economic sentiments, e.g. consumer moods, for the Central and Eastern European countries (CEECs) during the transition process. We first analyze the importance of economic confidence with respect to the CEEC's financial markets. Since the integration of formerly strongly regulated markets into global markets can also lead to an increase of the dependence of the CEECs' domestic market performance from 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. For these purposes, we apply a structural 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 find evidence supporting relationships between sentiments, income and share prices in case of the Czech Republic. Our results for the short run suggest that economic sentiments in general are strongly influenced by share prices and income but also offer some predictive power with respect to the latter. What is more, global sentiments play an important role in particular for the CEECs' share prices and income. The significance of this link increases with economic integration.
|Date of creation:||2009|
|Date of revision:|
|Contact details of provider:|| Postal: |
Web page: http://www.diw.de/en
More information through EDIRC
References listed on IDEAS
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.:
- Chelley-Steeley, Patricia L., 2005. "Modeling equity market integration using smooth transition analysis: A study of Eastern European stock markets," Journal of International Money and Finance, Elsevier, vol. 24(5), pages 818-831, September.
- W. Jos Jansen & Niek J. Nahuis, 2002.
"The Stock Market and Consumer Confidence: European Evidence,"
MEB Series (discontinued)
2002-11, Netherlands Central Bank, Monetary and Economic Policy Department.
- Jansen, W. Jos & Nahuis, Niek J., 2003. "The stock market and consumer confidence: European evidence," Economics Letters, Elsevier, vol. 79(1), pages 89-98, April.
- Niek J. Nahuis & W. Jos Jansen, 2003.
"Which Survey Indicators Are Useful for Monitoring Consumption? Evidence fron European Countries,"
- W. Jos Jansen & Niek J. Nahuis, 2004. "Which survey indicators are useful for monitoring consumption? Evidence from European countries," Journal of Forecasting, John Wiley & Sons, Ltd., vol. 23(2), pages 89-98.
- Mehrotra, Aaron & Rautava, Jouko, 2007.
"Do sentiment indicators help to assess and predict actual developments of the Chinese economy?,"
BOFIT Discussion Papers
11/2007, Bank of Finland, Institute for Economies in Transition.
- Aaron Mehrotra & Jouko Rautava, 2008. "Do sentiment indicators help to assess and predict actual developments of the Chinese economy?," Journal of Chinese Economic and Business Studies, Taylor & Francis Journals, vol. 6(3), pages 225-239.
- Fratzscher, M., 2001.
"Financial Market Integration in Europe: On the Effects of EMU on Stock Markets,"
48, Quebec a Montreal - Recherche en gestion.
- Fratzscher, Marcel, 2002. "Financial Market Integration in Europe: On the Effects of EMU on Stock Markets," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 7(3), pages 165-93, July.
- Fratzscher, Marcel, 2001. "Financial market integration in Europe: on the effects of EMU on stock markets," Working Paper Series 0048, European Central Bank.
- Jason Bram & Sydney Ludvigson, 1998.
"Does consumer confidence forecast household expenditure? a sentiment index horse race,"
Economic Policy Review,
Federal Reserve Bank of New York, issue Jun, pages 59-78.
- Jason Bram & Sydney Ludvigson, 1997. "Does consumer confidence forecast household expenditure?: A sentiment index horse race," Research Paper 9708, Federal Reserve Bank of New York.
- Daron Acemoglu & Andrew Scott, 1993.
"Consumer Confidence and Rational Expectations: Are Agents Beliefs Consistent with the Theory?,"
CEP Discussion Papers
dp0119, Centre for Economic Performance, LSE.
- Acemoglu, Daron & Scott, Andrew, 1994. "Consumer Confidence and Rational Expectations: Are Agents' Beliefs Consistent with the Theory?," Economic Journal, Royal Economic Society, vol. 104(422), pages 1-19, January.
- Solnik, Bruno H., 1974. "An equilibrium model of the international capital market," Journal of Economic Theory, Elsevier, vol. 8(4), pages 500-524, August.
When requesting a correction, please mention this item's handle: RePEc:diw:diwwpp:dp952. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Bibliothek)
If references are entirely missing, you can add them using this form.