Estimation of International Financial Integration: Evidence from European Countries

Nafis Sadat

MPRA Paper from University Library of Munich, Germany

Abstract: In the current state of the economy, securities and trade flows between countries exist fluently, however, such channels of flow do not completely map one-to-one without some attenuation, thereby preventing the notion of complete financial markets. This paper develops the econometric framework to identify the parameter which measures the degree of (imperfect) international risk-sharing, and employs nonlinear econometric methods to estimate for the values of the parameter across European countries. Our findings show how simple econometric methods can give a sensible measure of this risk-sharing, which can be used as a basis for economic model calibrations when solving DSGE models. Moreover, this paper lays the groundwork for the possibility of implementing further sophisticated nonlinear estimations to improve upon the measures already computed.

Keywords: Macroeconomics; monetary economics; nonlinear econometrics (search for similar items in EconPapers)
JEL-codes: C5 E00 (search for similar items in EconPapers)
Date: 2015-08-08, Revised 2015-08-25
New Economics Papers: this item is included in nep-ger and nep-opm
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:66283

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