EU Accession, Financial Integration, and Contagion Effects: Dynamic Correlation Analysis of CEEC-3 Bond Markets

Lu Yang and Shigeyuki Hamori

Transition Studies Review, 2013, vol. 20, issue 2, 179-189

Abstract: In this paper, we investigate the conditional correlations between the bond markets in CEEC-3 (i.e., Poland, Czech Republic, and Hungary) and Germany from 2000 to 2013 using the asymmetric dynamic conditional correlation model developed by Cappiello et al. (J Financ Econ 4:557–572, 2006 ). CEEC-3 comprise emerging transition economies that became European Union (EU) members in 2004, while Germany serves as a representative of the EU because it is the largest economy in the eurozone. Based on the presented analytical models, we make four important findings. First, we show that financial integration had already evolved before the adoption of the euro in 2004 in the Czech Republic, while the financial integration process continues in Poland but not in Hungary. Second, the bond markets in both Poland and Hungary decreased their dependence on that in Germany during the global financial crisis period. Third, financial contagion did not occur in the bond markets in CEEC-3 and Germany during the European sovereign debt crisis period. Finally, we can observe asymmetric effects on returns over time when markets fluctuate sharply. Copyright CEEUN 2013

Keywords: EU accession; Integration; Bond markets; Global financial crisis; E42; F36; G15 (search for similar items in EconPapers)
Date: 2013
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DOI: 10.1007/s11300-013-0276-4

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