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How did the Sovereign debt crisis affect the Euro financial integration? A fractional cointegration approach

José Carlos Vides (), Antonio Golpe () and Jesús Iglesias ()
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José Carlos Vides: University of Huelva
Jesús Iglesias: University of Seville

Empirica, 2018, vol. 45, issue 4, 685-706

Abstract: Abstract This paper examines financial integration among stock markets in the Eurozone using the prices from each stock index. Monthly time series are constructed for four major stock indices for the period between 1998 and 2016. A fractional cointegrated vector autoregressive model is estimated at an international level. Our results show that there is a perfect and complete Euro financial integration. Considering the possible existence of structural breaks, this paper also examines the fractional cointegration within each regime, showing that Euro financial integration is very robust. However, in the financial and sovereign debt crisis regime, IBEX 35 appears to be the weak link in Euro financial integration, unless Euro financial integration recovers when this period ends.

Keywords: Fractional cointegration; Eurozone; Financial integration; Financial market cointegration (search for similar items in EconPapers)
JEL-codes: C32 F41 G15 (search for similar items in EconPapers)
Date: 2018
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