European and International Bond Markets Integration
The concurrent era is characterised by strengthened interactions among financial markets and increased capital mobility globally. In this frames we examine the effects the international financial integration process has on the European bond markets. We perform a comparative study of the interactions of the European and international bond markets and exploit Cointegration analysis results on the elimination of stochastic trends and the decomposition of the underlying long run equilibria and short run causal relations. Our investigation provides evidence on the relation between the European integration process and that of globalisation, viewed through the bond markets- sector. Additionally the structural formulation applied, offers significant implications of the findings. All in all our analysis offers a number of answers on crucial queries towards the European bond markets integration process.
[1] Baele D., Ferrando A., Hordahl P., Krylova E. and Monnet C. (2004) ÔÇÿMeasuring Financial Integration In the Euro Area- European Central Bank Occasional Paper Series no 14.
[2] Baum C. and Barkoulas J. (2006) ÔÇÿDynamics of Intra-EMS Interest Rate Linkages- Journal of Money, Credit and Banking vol. 38(2)
[3] Bordo M., Eichengreen B. and Kim J. (1998) ÔÇÿWas There Really an Earlier Period of International Financial Integration Comparable to Today?- National Bureau of Economic Research
working paper no 6738
[4] Codogno L., Favero C. and Missale A. (2003) ÔÇÿYield Spreads on EMU Government Bonds- Economic Policy, pp 503-532
[5] Corhay A., Tourani Rad A. and Urbain J.-P. (1993) ÔÇÿCommon Stochastic Trends in European Stock Markets- Economics Letters
pp. 385-390
[6] Dickey, D.A. and Fuller, W.A. Distribution of the estimates for
autoregressive time series with a unit root. Journal of the
American Statistical Association 1979; 74; 427-431.
[7] Dunne P., Moore M. and Portes R. (2002) ÔÇÿDefining Benchmark
Status: An Application Using Euro-Area Bonds- National Bureau
of Economic Research, working paper no 9087
[8] Engle R. and Granger C. W. (1987) ÔÇÿCo-Integration and Error Correction: Representation, Estimation And Testing-
Econometrica pp. 251-276
[9] Engle R., Hendry D. and Richard J. F. (1983) ÔÇÿExogeneity-
Econometrica pp.277-304
[10] European Central Bank (2005) ÔÇÿIndicators of Financial Integration
in the Euro Area-
[11] Haug A., MacKinnon J. and Michelis L. (2000) ÔÇÿEuropean
Monetary Union: A Cointegration Analysis- Journal of
International Money and Finance v. 19 pp.419-432
[12] Holmes M. and Maghrebi N. (2006) ÔÇÿAre International Real
Interest Rate Linkages Characterised by Asymmetric
Adjustments? Journal of International Financial Markets,
Institutions and Money vol. 16
[13] Johansen S.(1988) Statistical Analysis of Cointegrating Vectors.
Journal of Economic Dynamics and Control;12; 231-254.
[14] Johansen S. (1992) ÔÇÿTesting Weak Exogeneity And The Order of
Cointegration In UK Money Demand Data- Journal of Policy
Modeling pp. 313-334
[15] Johansen S. (1991) ÔÇÿEstimation and Hypothesis Testing of
Cointegration Vectors in Gaussian Vector Autoregressive Models-
Econometrica pp. 1551-1580
[16] Johansen S. and Juselius K. (1992) ÔÇÿTesting Structural Hypotheses
In A Multivariate Cointegration Analysis of The PPP And The
UIP For UK- Journal of Econometrics pp. 211-244
[17] Johansen S. and Juselius K. (1994) ÔÇÿIdentification of The Long-
Run And The Short-Run Structure. An Application To The ISLM
Model- Journal of Econometrics pp. 7-36
[18] Kasa, K. (1992). ÔÇÿCommon stochastic trends in international stock
markets- Journal of Monetary Economics 9: 95-124.
[19] Kiehlborn T. and Mietzner M. (2005) ÔÇÿEU Financial Integration:
Is There a ÔÇÿCore Europe-? Evidence from a Cluster Based
Approach- Johann Wolfgang Goethe-Universität working paper
no. 130
[20] Kim S.-J., Lucey B. and Wu E. (2006) ÔÇÿDynamics of Bond Market
Integration Between Established and Accession EU Countries-
Journal of International Financial Markets, Institutions and Money
vol. 16(1) pp.41-56
[21] Kwiatkowski, D., P. C. B. Phillips, P. Schmidt, and Y. Shin
Testing the Null Hypothesis of Stationarity against the Alternative
of a Unit Root: How Sure Are We That Economic Time Series
Have a Unit Root?. Journal of Econometrics 1992; 54; 159-178.
[22] Lothian J. (2000) ÔÇÿCapital Market Integration and Exchange-Rate
Regimes in Historical Perspective- Research in Banking and
Finance, vol. 1
[23] Lothian J. (2001) ÔÇÿFinancial Integration Over the Past Three
Centuries- Independent Institute working paper no. 26
[24] MacKinnon J., Haug A. and Michelis L. (1999) ÔÇÿNumerical
Distribution Functions of Likelihood Ratio Tests for
Cointegration- Journal of Applied Econometrics pp.563-577
[25] Mishkin F. (1984) ÔÇÿAre Real Interest Rates Equal Across
Countries? An Empirical Investigation of International Parity
Conditions- The Journal of Finance vol. 39(5)
[26] Mussa M. and Goldstein M. (2006) ÔÇÿThe Integration of World
Capital Markets-
[27] Osterwald-Lennum M.. A Note with Fractiles of the Asymptotic
Distribution of the Maximum Likelihood Cointegration Rank Test
Statistics: Four Cases. Oxford Bulletin of Economics and
Statistics 1992; 54; 461-472.
[28] Pagano M. and von Thadden L. (2004) ÔÇÿThe European Bond
Markets Under EMU- Oxford Review of Economic Policy
[29] Yang J. (2006) ÔÇÿInternational Bond Markets Linkages: A
Structural VAR Analysis- Journal of International Financial
Markets, Institutions and Money
[30] Weber E. (2006) ÔÇÿBritish Interest Rate Convergence Between the
US and Europe: A Recursive Cointegration Analysis- SFB 649
Discussion Paper 2005-2006
[1] Baele D., Ferrando A., Hordahl P., Krylova E. and Monnet C. (2004) ÔÇÿMeasuring Financial Integration In the Euro Area- European Central Bank Occasional Paper Series no 14.
[2] Baum C. and Barkoulas J. (2006) ÔÇÿDynamics of Intra-EMS Interest Rate Linkages- Journal of Money, Credit and Banking vol. 38(2)
[3] Bordo M., Eichengreen B. and Kim J. (1998) ÔÇÿWas There Really an Earlier Period of International Financial Integration Comparable to Today?- National Bureau of Economic Research
working paper no 6738
[4] Codogno L., Favero C. and Missale A. (2003) ÔÇÿYield Spreads on EMU Government Bonds- Economic Policy, pp 503-532
[5] Corhay A., Tourani Rad A. and Urbain J.-P. (1993) ÔÇÿCommon Stochastic Trends in European Stock Markets- Economics Letters
pp. 385-390
[6] Dickey, D.A. and Fuller, W.A. Distribution of the estimates for
autoregressive time series with a unit root. Journal of the
American Statistical Association 1979; 74; 427-431.
[7] Dunne P., Moore M. and Portes R. (2002) ÔÇÿDefining Benchmark
Status: An Application Using Euro-Area Bonds- National Bureau
of Economic Research, working paper no 9087
[8] Engle R. and Granger C. W. (1987) ÔÇÿCo-Integration and Error Correction: Representation, Estimation And Testing-
Econometrica pp. 251-276
[9] Engle R., Hendry D. and Richard J. F. (1983) ÔÇÿExogeneity-
Econometrica pp.277-304
[10] European Central Bank (2005) ÔÇÿIndicators of Financial Integration
in the Euro Area-
[11] Haug A., MacKinnon J. and Michelis L. (2000) ÔÇÿEuropean
Monetary Union: A Cointegration Analysis- Journal of
International Money and Finance v. 19 pp.419-432
[12] Holmes M. and Maghrebi N. (2006) ÔÇÿAre International Real
Interest Rate Linkages Characterised by Asymmetric
Adjustments? Journal of International Financial Markets,
Institutions and Money vol. 16
[13] Johansen S.(1988) Statistical Analysis of Cointegrating Vectors.
Journal of Economic Dynamics and Control;12; 231-254.
[14] Johansen S. (1992) ÔÇÿTesting Weak Exogeneity And The Order of
Cointegration In UK Money Demand Data- Journal of Policy
Modeling pp. 313-334
[15] Johansen S. (1991) ÔÇÿEstimation and Hypothesis Testing of
Cointegration Vectors in Gaussian Vector Autoregressive Models-
Econometrica pp. 1551-1580
[16] Johansen S. and Juselius K. (1992) ÔÇÿTesting Structural Hypotheses
In A Multivariate Cointegration Analysis of The PPP And The
UIP For UK- Journal of Econometrics pp. 211-244
[17] Johansen S. and Juselius K. (1994) ÔÇÿIdentification of The Long-
Run And The Short-Run Structure. An Application To The ISLM
Model- Journal of Econometrics pp. 7-36
[18] Kasa, K. (1992). ÔÇÿCommon stochastic trends in international stock
markets- Journal of Monetary Economics 9: 95-124.
[19] Kiehlborn T. and Mietzner M. (2005) ÔÇÿEU Financial Integration:
Is There a ÔÇÿCore Europe-? Evidence from a Cluster Based
Approach- Johann Wolfgang Goethe-Universität working paper
no. 130
[20] Kim S.-J., Lucey B. and Wu E. (2006) ÔÇÿDynamics of Bond Market
Integration Between Established and Accession EU Countries-
Journal of International Financial Markets, Institutions and Money
vol. 16(1) pp.41-56
[21] Kwiatkowski, D., P. C. B. Phillips, P. Schmidt, and Y. Shin
Testing the Null Hypothesis of Stationarity against the Alternative
of a Unit Root: How Sure Are We That Economic Time Series
Have a Unit Root?. Journal of Econometrics 1992; 54; 159-178.
[22] Lothian J. (2000) ÔÇÿCapital Market Integration and Exchange-Rate
Regimes in Historical Perspective- Research in Banking and
Finance, vol. 1
[23] Lothian J. (2001) ÔÇÿFinancial Integration Over the Past Three
Centuries- Independent Institute working paper no. 26
[24] MacKinnon J., Haug A. and Michelis L. (1999) ÔÇÿNumerical
Distribution Functions of Likelihood Ratio Tests for
Cointegration- Journal of Applied Econometrics pp.563-577
[25] Mishkin F. (1984) ÔÇÿAre Real Interest Rates Equal Across
Countries? An Empirical Investigation of International Parity
Conditions- The Journal of Finance vol. 39(5)
[26] Mussa M. and Goldstein M. (2006) ÔÇÿThe Integration of World
Capital Markets-
[27] Osterwald-Lennum M.. A Note with Fractiles of the Asymptotic
Distribution of the Maximum Likelihood Cointegration Rank Test
Statistics: Four Cases. Oxford Bulletin of Economics and
Statistics 1992; 54; 461-472.
[28] Pagano M. and von Thadden L. (2004) ÔÇÿThe European Bond
Markets Under EMU- Oxford Review of Economic Policy
[29] Yang J. (2006) ÔÇÿInternational Bond Markets Linkages: A
Structural VAR Analysis- Journal of International Financial
Markets, Institutions and Money
[30] Weber E. (2006) ÔÇÿBritish Interest Rate Convergence Between the
US and Europe: A Recursive Cointegration Analysis- SFB 649
Discussion Paper 2005-2006
@article{"International Journal of Business, Human and Social Sciences:56064", author = "Dimitris Georgoutsos and Petros M. Migiakis", title = "European and International Bond Markets Integration", abstract = "The concurrent era is characterised by strengthened interactions among financial markets and increased capital mobility globally. In this frames we examine the effects the international financial integration process has on the European bond markets. We perform a comparative study of the interactions of the European and international bond markets and exploit Cointegration analysis results on the elimination of stochastic trends and the decomposition of the underlying long run equilibria and short run causal relations. Our investigation provides evidence on the relation between the European integration process and that of globalisation, viewed through the bond markets- sector. Additionally the structural formulation applied, offers significant implications of the findings. All in all our analysis offers a number of answers on crucial queries towards the European bond markets integration process.
", keywords = "financial integration, bond markets, cointegration", volume = "1", number = "6", pages = "194-6", }
