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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. 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.
  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. 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.
  4. Pierre-Olivier Gourinchas & Helene Rey, 2005. "International Financial Adjustment," NBER Working Papers 11155, National Bureau of Economic Research, Inc.
  5. Philip R. Lane & Gian-Maria Milesi-Ferretti, 2004. "International Investment Patterns," IMF Working Papers 04/134, International Monetary Fund.
  6. Lorenzo Cappiello & Robert F. Engle & Kevin Sheppard, 2006. "Asymmetric Dynamics in the Correlations of Global Equity and Bond Returns," Journal of Financial Econometrics, Society for Financial Econometrics, vol. 4(4), pages 537-572.
  7. 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.
  8. Chinn, Menzie David & Frankel, Jeffrey A., 2006. "Will the Euro Eventually Surpass the Dollar As Leading International Reserve Currency?," Santa Cruz Center for International Economics, Working Paper Series qt4hz4n9pb, Center for International Economics, UC Santa Cruz.
  9. 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.
  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. Philip R. Lane, 2006. "The Real Effects of EMU," The Institute for International Integration Studies Discussion Paper Series iiisdp115, IIIS.
  12. 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.
  13. 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.
  14. Kristin Forbes & Roberto Rigobon, 1999. "No Contagion, Only Interdependence: Measuring Stock Market Co-movements," NBER Working Papers 7267, National Bureau of Economic Research, Inc.
  15. Marco Del Negro & Robin Brooks, 2002. "International Stock Returns and Market Integration; A Regional Perspective," IMF Working Papers 02/202, International Monetary Fund.
  16. Cappiello, Lorenzo & Hördahl, Peter & Kadareja, Arjan & Manganelli, Simone, 2006. "The impact of the euro on financial markets," Working Paper Series 0598, European Central Bank.
  17. Lane, Philip & Milesi-Ferretti, Gian Maria, . "External Wealth of Nations," Instructional Stata datasets for econometrics extwealth, Boston College Department of Economics.
  18. Thomas Flavin, 2004. "The effect of the Euro on country versus industry portfolio diversification," Economics, Finance and Accounting Department Working Paper Series n1411004, Department of Economics, Finance and Accounting, National University of Ireland - Maynooth.
  19. Gian-Maria Milesi-Ferretti & Philip R. Lane, 2005. "Financial Globalization and Exchange Rates," IMF Working Papers 05/3, International Monetary Fund.
  20. Lane, P & Honohan, P, 1999. "Pegging To The Dollar And The Euro," Trinity Economics Papers 996, Trinity College Dublin, Department of Economics.
  21. Olivier Blanchard, 2007. "Adjustment within the euro. The difficult case of Portugal," Portuguese Economic Journal, Springer, vol. 6(1), pages 1-21, April.
  22. 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.
  23. Baldwin, Richard E., 2006. "The euro’s trade effects," Working Paper Series 0594, European Central Bank.
  24. 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.
  25. Gikas A. Hardouvelis & Dimitrios Malliaropulos & Richard Priestley, 2006. "EMU and European Stock Market Integration," The Journal of Business, University of Chicago Press, vol. 79(1), pages 365-392, January.
  26. Bekaert, Geert & Harvey, Campbell R, 1995. " Time-Varying World Market Integration," Journal of Finance, American Finance Association, vol. 50(2), pages 403-44, June.
  27. Moerman, Gerard, 2004. "Diversification in euro area stock markets: country versus industry," Working Paper Series 0327, European Central Bank.
  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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