Cross-country dependence and financial integration in the last 150 years

Nektarios Aslanidis () and Charalampos Papadakis ()
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Nektarios Aslanidis: Universitat Rovira I Virgili, ECO SOS
Charalampos Papadakis: Universitat Rovira I Virgili, ECO SOS

Empirical Economics, 2025, vol. 69, issue 4, No 6, 1779-1820

Abstract: Abstract Over the last two centuries, the international financial system has undergone significant developments, with key historical events shaping financial markets and economies worldwide. We offer a new long-term perspective on international financial market integration using a flexible dynamic panel approach that accommodates heterogeneous slope coefficients while accounting for cross-country dependence. Our analysis uncovers several interesting findings. For real long-term interest rates, we observe a distinct U-shaped pattern. In contrast, the integration of global financial markets for equities has significantly increased in recent years. Additionally, long-term nominal interest rates and bond markets have become considerably more integrated since the Bretton Woods era, exhibiting a J-shaped pattern throughout the period under study.

Keywords: Financial integration; Heterogeneous slope coefficients; Cross-country dependence; First era of globalization; Floating exchange rates; U-shaped pattern (search for similar items in EconPapers)
JEL-codes: C3 F2 F3 N1 N2 (search for similar items in EconPapers)
Date: 2025
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DOI: 10.1007/s00181-025-02808-y

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