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

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  • Vadym Volosovych

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

Abstract

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.

Suggested Citation

  • Vadym Volosovych, 2005. "Financial Market Integration Over the Long Run: Is there a U-shape?," Working Papers 05001, Department of Economics, College of Business, Florida Atlantic University, revised Feb 2007.
    • Handle: RePEc:fal:wpaper:05001
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    File URL: http://www.fau.edu/~vvolosov/Research/Volosovych_U-shape_20070130.pdf
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    References listed on IDEAS

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    2. Hagströmer, Björn & Anderson, Richard G. & Binner, Jane & Nilsson, Birger, 2009. "Dynamics in Systematic Liquidity," Working Papers 2009:7, Lund University, Department of Economics.
    3. Dennis Quinn & Hans-Joachim Voth, 2010. "Free Flows, Limited Diversification: Openness and the Fall and Rise of Stock Market Correlations, 1890–2001," NBER Chapters, in: NBER International Seminar on Macroeconomics 2009, pages 7-39, National Bureau of Economic Research, Inc.
    4. Chaipat Poonpatpibul & Vasuveerapat Ramdecha & Krittinan Wiengwangchai & Pawinee Jitmongkolsa-mer, 2008. "Border of Monetary Policy in the New Financial State," Working Papers 2008-01, Monetary Policy Group, Bank of Thailand.

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    More about this item

    Keywords

    financial markets integration; principal components; sovereign bonds;
    All these keywords.

    JEL classification:

    • F02 - International Economics - - General - - - International Economic Order and Integration
    • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions
    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • N2 - Economic History - - Financial Markets and Institutions

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