Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/208353
Authors: 
Hoffmann, Peter
Kremer, Manfred
Zaharia, Sonia
Year of Publication: 
2019
Series/Report no.: 
ECB Working Paper No. 2319
Abstract: 
This paper develops composite indicators of financial integration within the euro area for both price-based and quantity-based indicators covering money, bond, equity and banking markets. Prior to aggregation, individual integration indicators are harmonised by applying the probability integral transform. We find that financial integration in Europe increased steadily between 1995 and 2007. The subprime mortgage crisis marked a turning point, bringing about a marked drop in both composite indicators. This fragmentation trend reversed when the European banking union and the ECB's Outright Monetary Transactions Programme were announced in 2012, with financial integration recovering more strongly when measured by pricebased indicators. In a growth regression framework, we find that higher financial integration tends to be associated with an increase in per capita real GDP growth in euro area countries. This correlation is found to be stronger the higher a country's growth opportunities.
Subjects: 
composite indicator
economic growth
European Monetary Union
financial integration
financial stress
JEL: 
F36
F43
F45
G01
G15
Persistent Identifier of the first edition: 
ISBN: 
978-92-899-3888-4
Document Type: 
Working Paper

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