Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/153117
Authors: 
Cappiello, Lorenzo
Gérard, Bruno
Kadareja, Arjan
Manganelli, Simone
Year of Publication: 
2006
Series/Report no.: 
ECB Working Paper 683
Abstract: 
This study assesses the degree of financial integration for a selected number of new EU member states between themselves and with the euro zone. Within the framework of a factor model for market returns, we measure integration as the amount of variance explained by the common factor relative to the local components. We show that this measure of integration coincides with return correlation. Correlations are proxied by comovements, estimated via a regression quantile-based methodology. We find that the largest new member states, the Czech Republic, Hungary and Poland, exhibit strong comovements both between themselves and with the euro area. As for smaller countries, only Estonia and to a less extent Cyprus show increased integration both with the euro zone and the block of large economies. In the bond markets, we document an increase in integration only for the Czech Republic versus Germany and Poland.
Subjects: 
integration
new EU member states
regression quantile
JEL: 
C32
F30
G12
Document Type: 
Working Paper

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