Skip to main content Accessibility help

We use cookies to distinguish you from other users and to provide you with a better experience on our websites. Close this message to accept cookies or find out how to manage your cookie settings.

Close cookie message
×
Hostname: page-component-cb9f654ff-9b74x Total loading time: 0 Render date: 2025-08-13T09:30:47.701Z Has data issue: false hasContentIssue false
This chapter is part of a book that is no longer available to purchase from Cambridge Core

4 - The Economics of Financial Integration

from Part II - Financial Markets

Jakob de Haan ,
Sander Oosterloo  and
Dirk Schoenmaker
Jakob de Haan
Affiliation:
Rijksuniversiteit Groningen, The Netherlands
Sander Oosterloo
Affiliation:
Ministry of Finance, The Netherlands
Dirk Schoenmaker
Affiliation:
Vrije Universiteit, Amsterdam
Get access

Summary

OVERVIEW

This chapter begins by defining financial integration and identifying its drivers. Financial integration may be defined as a situation without frictions that discriminate between economic agents in their access to – and their investment of – capital, particularly on the basis of their location. Not only market forces but also collective action and public action are shown to be driving financial integration.

The second part of the chapter deals with measuring financial integration. Three categories of measures have been used for this purpose. The first category consists of price-based indicators that measure discrepancies in prices or returns on assets caused by the geographic origin of the assets. The second category consists of news-based measures. The underlying idea is that in a financially integrated area, portfolios should be well diversified so that news (i.e., arrival of new economic information) of a regional character has little impact on prices, whereas common or global news is relatively more important. The third category of measures are quantity-based indicators that measure the effects of frictions faced by the demand for and supply of investment opportunities, like cross-border activities or listings, and statistics on the cross-border holdings of investors.

The third part of the chapter gives an overview of the extent to which various financial markets in the EU are integrated. An important reason why the European Union put the creation of a single financial market high on the policy agenda is that it widely believed that financial integration may stimulate economic growth.

Information

Type
Chapter
Information
European Financial Markets and Institutions , pp. 107 - 134
Publisher: Cambridge University Press
Print publication year: 2009

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

Baele, L., Ferrando, A., Hördahl, P., Krylova, E., and Monnet, C. (2008), Measuring European Financial Integration, in: Freixas, X., Hartmann, P., and Mayer, C. (eds.), Handbook of European Financial Markets and Institutions, Oxford University Press, Oxford, 165–194.Google Scholar
Edison, H. J., Levine, R., Ricci, L., and Sløk, T. (2002), International Financial Integration and Economic Growth, Journal of International Money and Finance, 21(6), 749–776.CrossRefGoogle Scholar
Guiso, L., Jappelli, T., Padula, M., and Pagano, M. (2004), Financial Market Integration and Economic Growth in the EU, Economic Policy, 524–577.CrossRefGoogle Scholar
Adam, K., Jappelli, T., Menichini, A. M., Padula, M., and Pagano, M. (2002), Analyse, Compare, and Apply Alternative Indicators and Monitoring Methodologies to Measure the Evolution of Capital Market Integration in the European Union, Report to the European Commission, EC, Brussels.
Adjaouté, K. and Danthine, J.-P. (2003), European Financial Integration and Equity Returns: A Theory-Based Assessment, in: Gaspar, V. et al. (eds.), The Transformation of the European Financial System, ECB, Frankfurt.Google Scholar
Baele, L., Ferrando, A., Hördahl, P., Krylova, E., and Monnet, C. (2004), Measuring Financial Integration in the Euro Area, ECB Occasional Paper 14.
Baele, L., Ferrando, A., Hördahl, P., Krylova, E., and Monnet, C. (2008), Measuring European Financial Integration, in: Freixas, X., Hartmann, P., and Mayer, C. (eds.), Handbook of European Financial Markets and Institutions, Oxford University Press, Oxford, 165–194.Google Scholar
Baltzer, M., Cappiello, L., Santis, R. A., and Manganelli, S. (2008), Measuring Financial Integration in New EU Member States, ECB Occasional Paper 81.
Cappiello, L., Gérard, B., Kadareja, A., and Manganelli, S. (2006), Financial Integration of New EU Member States, ECB Working Paper 683.
,European Central Bank (2003), The Integration of Europe's Financial Markets, Monthly Bulletin, October, 53–56.
,European Central Bank (2007a), Financial integration in Europe, ECB, Frankfurt.Google Scholar
,European Central Bank (2007b), Euro Money Market Study 2006, ECB, Frankfurt.Google Scholar
,European Central Bank (2007c), The Euro Bonds and Derivatives Markets, ECB, Frankfurt.Google Scholar
Edison, H. J., Levine, R., Ricci, L., and Sløk, T. (2002), International Financial Integration and Economic Growth, Journal of International Money and Finance, 21(6), 749–776.CrossRefGoogle Scholar
,European Commission (2006), Commission Staff Working Document Addressed to the European Parliament and to the Council on the Impact of Regulation (EC) No 2560/2001 on Bank Charges for National Payments, EC, Brussels.
Guiso, L., Jappelli, T., Padula, M., and Pagano, M. (2004), Financial Market Integration and Economic Growth in the EU, Economic Policy, 524–577.CrossRefGoogle Scholar
Hardouvelis, G. A., Malliaropulos, D., and Priestley, R. (2006), EMU and European Stock Market Integration, Journal of Business, 79(1), 365–392.CrossRefGoogle Scholar
Lane, P. R. and Milesi-Ferretti, G. M. (2001), The External Wealth of Nations: Measures of Foreign Assets and Liabilities in Industrial and Developing Countries, Journal of International Economics, 55, 263–294.CrossRefGoogle Scholar
Pagano, M., Randl, O., Roëll, A., and Zechne, J. (2001). What Makes Stock Exchanges Succeed? Evidence from Cross-Listing Decisions, European Economic Review, 45, 770–82.CrossRefGoogle Scholar
Quinn, D. (1997), The Correlates of Change in International Financial Regulation, American Political Science Review, 91, 531–51.CrossRefGoogle Scholar

Accessibility standard: Unknown

Accessibility compliance for the PDF of this book is currently unknown and may be updated in the future.

Save book to Kindle

To save this book to your Kindle, first ensure no-reply@cambridge.org is added to your Approved Personal Document E-mail List under your Personal Document Settings on the Manage Your Content and Devices page of your Amazon account. Then enter the ‘name’ part of your Kindle email address below. Find out more about saving to your Kindle.

Note you can select to save to either the @free.kindle.com or @kindle.com variations. ‘@free.kindle.com’ emails are free but can only be saved to your device when it is connected to wi-fi. ‘@kindle.com’ emails can be delivered even when you are not connected to wi-fi, but note that service fees apply.

Find out more about the Kindle Personal Document Service.

Available formats
×

Save book to Dropbox

To save content items to your account, please confirm that you agree to abide by our usage policies. If this is the first time you use this feature, you will be asked to authorise Cambridge Core to connect with your account. Find out more about saving content to Dropbox.

Available formats
×

Save book to Google Drive

To save content items to your account, please confirm that you agree to abide by our usage policies. If this is the first time you use this feature, you will be asked to authorise Cambridge Core to connect with your account. Find out more about saving content to Google Drive.

Available formats
×