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The Euro and Financial Integration

  • Philip Lane
  • Sébastien Wälti

We provide a quantitative analysis of the impact of the euro on European financial integration. We consider both volume- and price-based indicators. In general, we find evidence that common membership of the euro area strengthens bilateral financial linkages. However, we emphasize that EMU has only been one innovation driving European financial integration in recent years, with global factors also increasingly important.

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Paper provided by IIIS in its series The Institute for International Integration Studies Discussion Paper Series with number iiisdp139.

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Date of creation: 25 May 2006
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Handle: RePEc:iis:dispap:iiisdp139
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  1. Gian-Maria Milesi-Ferretti & Philip R. Lane, 2005. "Financial Globalization and Exchange Rates," IMF Working Papers 05/3, International Monetary Fund.
  2. Marco Pagano & Ernst-Ludwig von Thadden, 2004. "The European Bond Markets under EMU," CSEF Working Papers 126, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy.
  3. Corsetti, Giancarlo & Pericoli, Marcello & Sbracia, Massimo, 2005. "'Some contagion, some interdependence': More pitfalls in tests of financial contagion," Journal of International Money and Finance, Elsevier, vol. 24(8), pages 1177-1199, December.
  4. Philip R. Lane & Gian-Maria Milesi-Ferretti, 2004. "International Investment Patterns," IMF Working Papers 04/134, International Monetary Fund.
  5. Kristin J. Forbes & Roberto Rigobon, 2002. "No Contagion, Only Interdependence: Measuring Stock Market Comovements," Journal of Finance, American Finance Association, vol. 57(5), pages 2223-2261, October.
  6. David Barr & Francis Breedon & David Miles, 2003. "Life on the outside: economic conditions and prospects outside euroland," Economic Policy, CEPR;CES;MSH, vol. 18(37), pages 573-613, October.
  7. Cappiello, Lorenzo & Hördahl, Peter & Kadareja, Arjan & Manganelli, Simone, 2006. "The impact of the euro on financial markets," Working Paper Series 0598, European Central Bank.
  8. Philip R. Lane, 2006. "The Real Effects of EMU," The Institute for International Integration Studies Discussion Paper Series iiisdp115, IIIS.
  9. Lane, P & Honohan, P, 1999. "Pegging To The Dollar And The Euro," Trinity Economics Papers 996, Trinity College Dublin, Department of Economics.
  10. Fratzscher, M., 2001. "Financial Market Integration in Europe: On the Effects of EMU on Stock Markets," Papers 48, Quebec a Montreal - Recherche en gestion.
  11. Lane, Philip & Milesi-Ferretti, Gian Maria, . "External Wealth of Nations," Instructional Stata datasets for econometrics extwealth, Boston College Department of Economics.
  12. Hardouvelis, Gikas A & Malliaropoulos, Dimitrios & Priestley, Richard, 1999. "EMU and European Stock Market Integration," CEPR Discussion Papers 2124, C.E.P.R. Discussion Papers.
  13. Moerman, Gerard, 2004. "Diversification in euro area stock markets: country versus industry," Working Paper Series 0327, European Central Bank.
  14. Olivier Blanchard & Francesco Giavazzi, 2002. "Current Account Deficits in the Euro Area: The End of the Feldstein Horioka Puzzle?," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 33(2), pages 147-210.
  15. Kpate Adjaouté, 2004. "Equity Returns and Integration: Is Europe Changing?," Oxford Review of Economic Policy, Oxford University Press, vol. 20(4), pages 555-570, Winter.
  16. Chinn, Menzie David & Frankel, Jeffrey A., 2005. "Will the Euro Eventually Surpass the Dollar as Leading International Reserve Currency?," Center for Global, International and Regional Studies, Working Paper Series qt6p4215w1, Center for Global, International and Regional Studies, UC Santa Cruz.
  17. Pierre-Olivier Gourinchas & Hélène Rey, 2007. "International Financial Adjustment," Journal of Political Economy, University of Chicago Press, vol. 115(4), pages 665-703, 08.
  18. Flavin, Thomas J., 2004. "The effect of the Euro on country versus industry portfolio diversification," Journal of International Money and Finance, Elsevier, vol. 23(7-8), pages 1137-1158.
  19. John M. Griffin & G. Andrew Karolyi, . "Another Look at the Role of the Industrial Structure of Markets for International Diversification Strategies," Research in Financial Economics 9608, Ohio State University.
  20. Dusan Isakov & Frédéric Sonney, 2004. "Are Practitioners Right? On the Relative Importance of Industrial Factors in International Stock Returns," Swiss Journal of Economics and Statistics (SJES), Swiss Society of Economics and Statistics (SSES), vol. 140(III), pages 355-379, September.
  21. Robin Brooks & Marco Del Negro, 2003. "International stock returns and market integration: A regional perspective," Working Paper 2002-20, Federal Reserve Bank of Atlanta.
  22. Heston, Steven L. & Rouwenhorst, K. Geert, 1994. "Does industrial structure explain the benefits of international diversification?," Journal of Financial Economics, Elsevier, vol. 36(1), pages 3-27, August.
  23. Geert Bekaert & Campbell R. Harvey, 1994. "Time-Varying World Market Integration," NBER Working Papers 4843, National Bureau of Economic Research, Inc.
  24. Sheppard, Kevin & Cappiello, Lorenzo & Engle, Robert F., 2003. "Asymmetric dynamics in the correlations of global equity and bond returns," Working Paper Series 0204, European Central Bank.
  25. Baldwin, Richard E., 2006. "The euro’s trade effects," Working Paper Series 0594, European Central Bank.
  26. Lieven Baele & Annalisa Ferrando & Peter Hördahl & Elizaveta Krylova & Cyril Monnet, 2004. "Measuring financial integration in the euro area," Occasional Paper Series 14, European Central Bank.
  27. Olivier Blanchard, 2007. "Adjustment within the euro. The difficult case of Portugal," Portuguese Economic Journal, Springer, vol. 6(1), pages 1-21, April.
  28. Kpate ADJAOUTÉ & Jean-Pierre DANTHINE, 2003. "European Financial Integration and Equity Returns: A Theory-Based Assessment," FAME Research Paper Series rp84, International Center for Financial Asset Management and Engineering.
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