Financial integration, GDP correlation and the endogeneity of optimum currency areas

Stefano Schiavo

No 25/2005, Working Papers from University of Verona, Department of Economics

Abstract: The paper analyzes 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: we find evidence that capital markets integration exerts a positive effect on output correlation. This in turn has two major implications. First, it corroborates the hypothesis of the endogeneity of optimum currency areas, whereby after joining a monetary union countries fit better standard OCA criteria; second, it provides European policymakers with yet another reason to purse financial integration in the euro area (and in prospective members as well).

Keywords: business cycle; EMU; endogeneity; integration; optimum currency areas (search for similar items in EconPapers)
JEL-codes: E32 E44 F36 (search for similar items in EconPapers)
Pages: 43
Date: 2005-09
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Citations: View citations in EconPapers (17)

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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 (2008)
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