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Financial Market Integration Over the Long Run: Is there a U-shape?

  • Vadym Volosovych

    ()

    (Department of Economics, College of Business, Florida Atlantic University)

I show that the principal components analysis can be used to quantify the degree of economic integration, trace its evolution over time, and capture episodes of market segmentation. Based on long series of sovereign bond data for fifteen industrialized economies I document clear evidence of higher financial markets integration at the end of the 20th century compared to the earlier periods (J -shaped trend with a trough as early as the 1920s). Countries’ sovereign bond markets were much more segmented prior to World War I than in the following periods.

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File URL: http://www.fau.edu/~vvolosov/Research/Volosovych_U-shape_20070130.pdf
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Paper provided by Department of Economics, College of Business, Florida Atlantic University in its series Working Papers with number 05001.

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Length: 38 pages
Date of creation: Jul 2005
Date of revision: Feb 2007
Handle: RePEc:fal:wpaper:05001
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Web page: http://business.fau.edu/economics

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  1. Elliott, Graham & Rothenberg, Thomas J & Stock, James H, 1996. "Efficient Tests for an Autoregressive Unit Root," Econometrica, Econometric Society, vol. 64(4), pages 813-36, July.
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  22. Serena Ng & Pierre Perron, 2001. "LAG Length Selection and the Construction of Unit Root Tests with Good Size and Power," Econometrica, Econometric Society, vol. 69(6), pages 1519-1554, November.
  23. Rajan, Raghuram G. & Zingales, Luigi, 2003. "The great reversals: the politics of financial development in the twentieth century," Journal of Financial Economics, Elsevier, vol. 69(1), pages 5-50, July.
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  27. Neal, Larry, 1985. "Integration of International Capital Markets: Quantitative Evidence from the Eighteenth to Twentieth Centuries," The Journal of Economic History, Cambridge University Press, vol. 45(02), pages 219-226, June.
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