Market dynamics and integration of the financial markets of the NAFTA countries

Javier Emmanuel Anguiano-Pita () and Antonio Ruiz-Porras

Lecturas de Economía, 2020, issue 92, 67-100

Abstract: The aim of this paper is to study the dynamics of the integration process of the bond, interbank, currency and stock markets of the NAFTA region. For this purpose, we use the generalized dynamic factor model originally proposed by Forni, Hallin, Lippi and Reichlin (2005) and representative series of monthly returns of the analyzed markets for the period from January 1995 to December 2017. The main results suggest that: 1) There are asymmetries in the size of the markets; 2) there is evidence of structural breaks; 3) common factors exist among the financial markets; 4) the markets have differentiated levels of integration; and 5) the currency and stock markets are the most sensitive to the common components. These findings may be useful to analyze the evolution of NAFTA and to propose economic and financial regional policies

Keywords: financial integration; monetary markets; currency markets; interbank markets; stock markets; generalized dynamic factor model, NAFTA. (search for similar items in EconPapers)
JEL-codes: C58 F36 G15 (search for similar items in EconPapers)
Date: 2020
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Persistent link: https://EconPapers.repec.org/RePEc:lde:journl:y:2020:i:92:p:67-100

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DOI: 10.17533/udea.le.n92a03

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