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Journal of Economic Integration 2015 December;30(4) :708-760.
Time-Varying Bond Market Integration in EMU

Priyanshi Gupta Sanjay Sehgal Florent Deisting 

University of Delhi, New Delhi, India
Groupe ESC Pau, Pau, France
Corresponding Author: Priyanshi Gupta ,Tel: +91 8879252473, Email:
Copyright ©2015 Journal of Economic Integration
We examine the level and progress of bond market integration amongst the eleven Economic and Monetary Union countries with active bond markets, over normal and crisis periods. The study covers data from January 2002 up to March 2014. We employ seven indicators for assessing integration, namely beta convergence, sigma convergence, variance ratio, Asymmetric Dynamic Conditional Correlation, dynamic co-integration, market synchronisation, and common factors approach. The results suggest that there is no heterogeneity in the integration process of large-sized economies and medium-sized economies, thereby restricting portfolio diversification potential. Further, bond market integration in the Economic and Monetary Union deteriorated during the crisis period, especially during the European debt crisis, with the economies of Greece, Ireland, Italy, Portugal, and Spain being the worst affected. We observe that bond markets take a lead in information linkages vis-à-vis stock markets, and hence should get precedence in policy intervention relating to market integration, development, and crisis management.

JEL Classification
C22: Time Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models
E44: Financial Markets and the Macroeconomy
F36: Financial Aspects of Economic Integration
G14: Information and Market Efficiency; Event Studies
G15: International Financial Markets
Keywords: Bond Market Linkages | EMU Countries | Global Financial Crisis | European Debt Crisis | Time-varying Financial Integration.
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