From Various Degrees of Trade to Various Degrees of Financial Integration: What do Interest Rates Have to Say?
Adeline Bachellerie,
Jérôme Héricourt and
Valérie Mignon ()
Working Papers from CEPII research center
Abstract:
This paper proposes a systematic study of the degree of financial integration following the degree of trade integration according to Balassa’s (1961) classification, from preferential trading area to complete economic integration. To this end, we exploit all the information contained in interest rates and rely on the expectations hypothesis of the term structure of interest rates and real interest rate parity. These two conditions are empirically investigated on various regional trade agreements, using cointegration techniques by paying a special attention to potential breaks. Our results show that customs unions, corresponding to step 3 of the Balassa’s classification, seem to be a decisive threshold after which financial integration robustly takes place.
Keywords: FINANCIAL INTEGRATION; TRADE INTEGRATION; REGIONAL TRADE AGREEMENT; TERM STRUCTURE OF INTEREST RATES; REAL INTEREST RATE PARITY (search for similar items in EconPapers)
JEL-codes: C22 E43 F15 (search for similar items in EconPapers)
Date: 2009-01
References: View references in EconPapers View complete reference list from CitEc
Citations:
Downloads: (external link)
http://www.cepii.fr/PDF_PUB/wp/2009/wp2009-01.pdf (application/pdf)
Related works:
Journal Article: From various degrees of trade to various degrees of financial integration: What do interest rates have to say? (2009) 
Working Paper: From Various Degrees of Trade to Various Degrees of Financial Integration: What Do Interest Rates Have to Say? (2009)
Working Paper: From Various Degrees of Trade to Various Degrees of Financial Integration: What Do Interest Rates Have to Say? (2009)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
HTML/Text
Persistent link: https://EconPapers.repec.org/RePEc:cii:cepidt:2009-01
Access Statistics for this paper
More papers in Working Papers from CEPII research center Contact information at EDIRC.
Bibliographic data for series maintained by ().