Dynamics of Equity Market Integration in Europe: Impact of Political Economy Factors

Journal of Common Market Studies, Vol. 48, No. 3, 2010

Institute for International Integration Studies (IIIS) Working Paper No. 19

25 Pages Posted: 4 Mar 2005 Last revised: 10 Jan 2010

Cal B. Muckley

University College Dublin

Raj Aggarwal

University of Akron; Federal Reserve Banks - Federal Reserve Bank of Cleveland

Brian M. Lucey

Trinity Business School, Trinity College Dublin; University of Ljubljana - Faculty of Economics

Date Written: June 1, 2006

Abstract

Unlike most prior literature in finance and economics, this paper focuses on events in the political economy and examines the integration of European equity markets over the 1988 through 2002 period using three innovative techniques that assesses how the level of integration in equity price levels changes over time. The results show that notwithstanding the rising interdependencies between the European and US equity market until the mid-1990s, the long run integrative relationships governing the European markets began to strengthen only in the late 1990s and in particular since 1997. This evidence suggests that despite several years of political willingness by European leaders to integrate economies, it was not until the Treaty of Amsterdam and the establishment of the European Central Bank that the markets deemed that European integration would in fact occur.

Keywords: Integration, Kalman Filter, EMU, Cointegration

JEL Classification: C22, E44, F36

Suggested Citation

Muckley, Cal B. and Aggarwal, Raj and Lucey, Brian M., Dynamics of Equity Market Integration in Europe: Impact of Political Economy Factors (June 1, 2006). Journal of Common Market Studies, Vol. 48, No. 3, 2010; Institute for International Integration Studies (IIIS) Working Paper No. 19. Available at SSRN: https://ssrn.com/abstract=676082

Cal B. Muckley (Contact Author)

University College Dublin ( email )

Blackrock, Co. Dublin
Ireland
+353-1-716-8091 (Phone)

Raj Aggarwal

University of Akron ( email )

Akron, OH 44325-4803
United States

Federal Reserve Banks - Federal Reserve Bank of Cleveland ( email )

East 6th & Superior
Cleveland, OH 44101-1387
United States

Brian M. Lucey

Trinity Business School, Trinity College Dublin ( email )

The Sutherland Centre, Level 6, Arts Building
Dublin 2
Ireland
+353 1 608 1552 (Phone)
+353 1 679 9503 (Fax)

University of Ljubljana - Faculty of Economics ( email )

Kardeljeva ploscad 17
Ljubljana, 1000
Slovenia

Paper statistics

Downloads
74
Rank
266,122
Abstract Views
795