Financial Integration, GDP Correlation and the Endogeneity of Optimum Currency Areas

Stefano Schiavo

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Abstract: The paper analyses the relationship between trade, financial integration and business cycle synchronization in the euro area. The introduction of the euro has had a noticeable impact on European financial markets. Evidence that capital market integration exerts a positive effect on output correlation has two major implications. First, it corroborates the hypothesis of the endogeneity of optimum currency areas, whereby after joining a monetary union countries better meet standard OCA criteria; second, it provides European policy-makers with yet another reason to pursue financial integration in the euro area (and in prospective members as well).

Date: 2008-02
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Published in Economica, 2008, 75, pp.168-189. ⟨10.1111/j.1468-0335.2007.00598.x⟩

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Related works:
Journal Article: Financial Integration, GDP Correlation and the Endogeneity of Optimum Currency Areas (2008)
Working Paper: Financial Integration, GDP Correlation and the Endogeneity of Optimum Currency Areas (2008)
Working Paper: Financial integration, GDP correlation and the endogeneity of optimum currency areas (2005)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:spmain:hal-01022326

DOI: 10.1111/j.1468-0335.2007.00598.x

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