Regional Versus Global Integration of Euro Zone Retail Banking Markets: Understanding the Recent Evidence from Price-Based Integration Measures
This study investigates the current state of euro zone banking market integration by applying convergence and cointegration measures to mortgage and short-term corporate loan markets. These two measures of integration often lead to contradicting conclusions and are therefore comparatively analyzed. As an innovation to the literature, convergence measures are exposed to a difference-in-differences methodology which allows separating euro zone-specific from global integration effects. Our results show that euro zone-specific convergence exists mainly in the pre-EMU period whereas cointegration is especially prominent before 1993 and after 1998 but hardly present in between. Overall, we conclude that (1) in the presence of exchange rate uncertainty, cross-country convergence should focus on margins rather than rates, (2) convergence of retail banking interest rates is largely a result of integrating money and bonds markets in anticipation of the single currency and (3) a monetary union can produce (co)integration when retail rates react similarly to a single monetary policy rate. Thus, for the euro zone it appears that convergence measures provide the most information for the period leading up to the EMU whereas cointegration is more useful during the EMU period as well as prior to the ERM crisis in 1992.
|Date of creation:||2005|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: +31 (0)43 38 83 830
Web page: http://www.maastrichtuniversity.nl/
More information through EDIRC
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.:
- James W. Kolari & Donald R. Fraser & Ali Anari, 1998. "The Effects of Securitization on Mortgage Market Yields: A Cointegration Analysis," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 26(4), pages 677-693.
- Centeno, Mario & Mello, Antonio S., 1999. "How integrated are the money market and the bank loans market within the European Union?," Journal of International Money and Finance, Elsevier, vol. 18(1), pages 75-106, January.
- 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.
- Brada, Josef C. & Kutan, Ali M. & Zhou, Su, 2002.
"Real and monetary convergence within the European Union and between the European Union and candidate countries: A rolling cointegration approach,"
ZEI Working Papers
B 05-2002, ZEI - Center for European Integration Studies, University of Bonn.
- Josef C. Brada & Ali M. Kutan & Su Zhou, 2002. "Real and Monetary Convergence within the European Union and Between the European Union and Candidate Countries: A Rolling Cointegration Approach," William Davidson Institute Working Papers Series 458, William Davidson Institute at the University of Michigan.
- Heinemann, Friedrich & Schüler, Martin, 2002.
"How integrated are the European retail financial markets? A cointegration analysis,"
ZEW Discussion Papers
02-22, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
- Schüler, Martin & Heinemann, Friedrich, 2002. "How integrated are the European retail financial markets? A cointegration analysis," Research Notes 3b, Deutsche Bank Research.
- Manna, Michele, 2004. "Developing statistical indicators of the integration of the euro area banking system," Working Paper Series 0300, European Central Bank.
- Heuson, Andrea & Passmore, Wayne & Sparks, Roger, 2001. "Credit Scoring and Mortgage Securitization: Implications for Mortgage Rates and Credit Availability," The Journal of Real Estate Finance and Economics, Springer, vol. 23(3), pages 337-63, November.
- Jones, David, 2000. "Emerging problems with the Basel Capital Accord: Regulatory capital arbitrage and related issues," Journal of Banking & Finance, Elsevier, vol. 24(1-2), pages 35-58, January.
- Kuttner, Kenneth N., 2001.
"Monetary policy surprises and interest rates: Evidence from the Fed funds futures market,"
Journal of Monetary Economics,
Elsevier, vol. 47(3), pages 523-544, June.
- Kenneth N. Kuttner, 2000. "Monetary policy surprises and interest rates: evidence from the Fed funds futures markets," Staff Reports 99, Federal Reserve Bank of New York.
- Peter G. Dunne & Michael J. Moore & Richard Portes, 2002.
"Defining Benchmark Status: An Application using Euro-Area Bonds,"
NBER Working Papers
9087, National Bureau of Economic Research, Inc.
- Dunne, Peter & Moore, Michael J & Portes, Richard, 2002. "Defining Benchmark Status: An Application using Euro-Area Bonds," CEPR Discussion Papers 3490, C.E.P.R. Discussion Papers.
- Kleimeier, Stefanie & Sander, Harald, 2000. "Regionalisation versus globalisation in European financial market integration: Evidence from co-integration analyses," Journal of Banking & Finance, Elsevier, vol. 24(6), pages 1005-1043, June.
- Jane katz, 1997. "Getting secure," Regional Review, Federal Reserve Bank of Boston, issue Sum, pages 13-17.
- Corvoisier, Sandrine & Gropp, Reint, 2002.
"Bank concentration and retail interest rates,"
Journal of Banking & Finance,
Elsevier, vol. 26(11), pages 2155-2189, November.
- Arturo Estrella, 2002. "Securitization and the efficacy of monetary policy," Economic Policy Review, Federal Reserve Bank of New York, issue May, pages 243-255.
- Inês Cabral & Frank Dierick & Jukka Vesala, 2002. "Banking integration in the euro area," Occasional Paper Series 06, European Central Bank.
- Slaughter, Matthew J., 2001. "Trade liberalization and per capita income convergence: a difference-in-differences analysis," Journal of International Economics, Elsevier, vol. 55(1), pages 203-228, October.
- Toolsema, Linda A. & Sturm, Jan-Egbert & Haan, Jakob de, 2002. "Convergence of pass-through from money market to lending rates in EMU countries: new evidence," CCSO Working Papers 200206, University of Groningen, CCSO Centre for Economic Research.
When requesting a correction, please mention this item's handle: RePEc:unm:umamet:2005031. 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: (Charles Bollen)
If references are entirely missing, you can add them using this form.