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Has International Financial Integration Increased?

Open Economics Review, Vol. 14, pp. 299-317, July 2003

Posted: 5 Nov 2004  

James R. Lothian

Gabelli School of Business, Fordham University; National Bureau of Economic Research (NBER)

Lawrence G. Goldberg

University of Miami - Department of Finance

John Okunev

Coda Asset Management

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Abstract

This paper compares the behavior of real interest rate differentials across the major countries under the Bretton Woods regime and the regime of floating exchanges that replaced it. The primary object is to investigate both the extent of market integration and its changes over time. For all fifteen possible country pairs, real interest differentials are mean reverting, and in two-thirds of these cases, indistinguishable from zero statistically. For all country pairs on average and for most such pairs individually, moreover, the estimated differentials are not appreciably different in absolute value than the differentials that we estimate for various money-market rates within the United States. Additional evidence points to a narrowing of differentials under floating rates over time and an increase in speeds of convergence.

Keywords: Financial integration, interest-rate equalization, real interest rates

JEL Classification: F36, E40

Suggested Citation

Lothian, James R. and Goldberg, Lawrence G. and Okunev, John, Has International Financial Integration Increased?. Open Economics Review, Vol. 14, pp. 299-317, July 2003. Available at SSRN: https://ssrn.com/abstract=613691

James R. Lothian (Contact Author)

Gabelli School of Business, Fordham University ( email )

113 West 60th Street
New York, NY 10023
United States
212-636-6147 (Phone)
212-765-5573 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Lawrence G. Goldberg

University of Miami - Department of Finance

P.O. Box 248094
Coral Gables, FL 33124-6552
United States

John Okunev

Coda Asset Management ( email )

10 Arnold St
Queens park
Sydney, 2022
Australia
+61266744575 (Phone)

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