Euro Area Banking Sector Integration - Using Hierarchical Cluster Analysis Techniques

43 Pages Posted: 1 Jun 2006

Date Written: May 2006

Abstract

In this study we apply cluster analysis techniques, including a novel smoothing method, to detect some basic patterns and trends in the euro area banking sector in terms of the degree of homogeneity of countries. We find that in the period 1998-2004 the banking sectors in the euro area countries seem to have become somewhat more homogeneous, although the results are not unequivocal and considerable differences remain, leaving scope for further integration. In terms of clustering, the Western and Central European countries (like Germany, France, Belgium, and to some extent also the Netherlands, Austria and Italy) tend to cluster together, while Spain and Portugal and more recently also Greece usually are in the same distinct cluster. Ireland and Finland form separate clusters, but overall tend to be closer to the Western and Central European cluster.

Keywords: Financial integration, cluster analysis, banking sector

JEL Classification: C49, F36, G21

Suggested Citation

Kok, Christoffer and Puigvert Gutierrez, Josep Maria, Euro Area Banking Sector Integration - Using Hierarchical Cluster Analysis Techniques (May 2006). ECB Working Paper No. 627. Available at SSRN: https://ssrn.com/abstract=900399

Christoffer Kok (Contact Author)

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

Josep Maria Puigvert Gutierrez

European Central Bank ( email )

Kaiserstrasse 29
D-60311 Frankfurt am Main
Germany

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