Time-varying integration in European post-transition sovereign bond market

Petra Posedel Šimović (), Marina Tkalec and Maruška Vizek

No 1501, Working Papers from The Institute of Economics, Zagreb

Abstract: The aim of this paper is to study time-varying integration between European post-transition government bond markets and eurozone bond market. We follow the empirical approach defined in Bekaert and Harvey’s (1995) seminal paper, which enables direct estimation of the time-varying degree of financial markets integration. We thus investigate bond markets of eight new member states of EU and one non-EU member (Ukraine). The result of our empirical examination is a time-varying parameter of integration that is driven by a set of macroeconomic instruments defined in order to represent the intensity of real economic integration of analyzed countries into the eurozone, and their fiscal stances. Our results suggest integration varies with respect to economic development, as economically more advanced countries demonstrate a higher level of integration in the observed period. Moreover, we observe that integration decreased with the financial crisis, but it levelled off relatively swiftly afterwards. Depending on the country, joining the EU either exerted a positive boost on sovereign bond integration, or was neutral with regards to integration. We also show that macroeconomic performance relative to the eurozone benchmark and fiscal stance matter greatly for bond market integration in all countries under examination.

Keywords: European post-transition countries; sovereign securities markets; bond market integration (search for similar items in EconPapers)
JEL-codes: E44 F36 G15 (search for similar items in EconPapers)
Pages: 36 pages
Date: 2015-04
New Economics Papers: this item is included in nep-cba, nep-eec, nep-mac and nep-tra
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Related works:
Working Paper: TIME-VARYING INTEGRATION IN EUROPEAN POST-TRANSITION SOVEREIGN BOND MARKETS (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:iez:wpaper:1501

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