As the European Union emerges from its worst recession since the Second World War, it has to tackle an equally pressing issue: a sovereign debt crisis. Yield spreads in Greece, Portugal, Ireland and Spain have soared. The era of cheap government borrowing and integrated euro area (EA) government bond markets appears to be over, and fractures in EA solidarity are present. This dissertation seeks to update existing literature by assessing the current state of government bond market integration in the EA. Results suggest that many years of financial integration in EA government bond markets has been reversed in a few months, and that the status quo is not sustainable for the peripheral member countries. Unless Greece, Portugal, Ireland and (to a lesser extent) Spain adopt significant microeconomic structural reforms to regain long-lost competitiveness vis-à-vis the EA’s core (notably Germany), whilst at the same time avoid falling back into deep recession, the Euro project will not be able to continue in its current form.
Inhaltsverzeichnis (Table of Contents)
- 1.0 Introduction...
- 1.1 Research objectives
- 2.0 Literature review..
- 2.1 Financial integration – definitions, costs, benefits and barriers......
- 2.1.1 European economic integration….….………………………….
- 2.1.2 Definitions of financial integration..
- 2.1.3 Benefits and costs of financial integration........
- 2.1.4 Barriers to financial integration.
- 2.2 Financial integration in the run-up to the financial crisis..
- 2.3 High debt Europe.........
- 3.0 Methodology – measuring financial integration.………………..
- 3.1 Price-based measures..
- 3.2 News-based measures..
- 3.3 Cointegration........
- 3.4 Other measures.
- 3.5 Data considerations...
- 3.6 Risk adjustments.......
- 3.7 Nominal or real rates..
- 4.0 Data
- 5.0 Results - macroeconomic analysis and measurements of financial integration
- 5.1 Macroeconomic analysis of the euro area periphery..
- 5.2 Correlation coefficient analysis......
- 5.3 Price-based measures of integration.........
- 5.3.1 Yield spreads......
- 5.3.2 Cross-sectional dispersion..
- 5.4 News-based measures of integration.........
- 5.4.1 Conditional betas
- 5.4.2 Variance ratio..
- 5.5 Jumping cointegration analysis
- 6.0 Conclusions...........
Zielsetzung und Themenschwerpunkte (Objectives and Key Themes)
This dissertation explores the current state of government bond market integration in the euro area periphery, specifically focusing on Greece, Ireland, Portugal, and Spain. It aims to update existing literature by assessing the extent to which financial integration has been reversed in these countries following the financial crisis and the subsequent sovereign debt crisis. The work analyzes the impact of this decline on the sustainability of the Euro project and investigates the potential for these peripheral countries to regain competitiveness and avoid further economic hardship.
- Financial integration in the euro area
- Impact of the financial crisis and sovereign debt crisis on government bond market integration
- Macroeconomic factors driving the divergence of peripheral economies from the euro area core
- Measures and analysis of financial integration in the euro area
- Implications for the sustainability of the Euro project
Zusammenfassung der Kapitel (Chapter Summaries)
- Introduction: This chapter introduces the research topic and objectives, highlighting the significance of understanding the current state of government bond market integration in the euro area periphery. It also provides background information on the economic and financial context of the study, particularly the sovereign debt crisis and its implications.
- Literature Review: This chapter reviews existing literature on financial integration, examining definitions, costs, benefits, and barriers. It explores the historical context of European economic integration and analyzes the role of financial integration in the period leading up to the financial crisis. The chapter also examines the issue of high debt levels in Europe, providing context for the sovereign debt crisis.
- Methodology: This chapter outlines the methodology used to measure financial integration, focusing on price-based measures, news-based measures, and cointegration analysis. It discusses data considerations, risk adjustments, and the choice of nominal or real rates in the analysis.
- Data: This chapter presents the data used in the analysis, providing details on the specific government bond series and macroeconomic indicators analyzed. It includes descriptive statistics of the data to provide a comprehensive understanding of the data set.
- Results: This chapter presents the results of the macroeconomic analysis and the measurements of financial integration. It examines the macroeconomic performance of the peripheral countries, including real GDP growth, inflation, unemployment, government debt, and current account balances. It also presents the results of correlation coefficient analysis, price-based measures of integration, and news-based measures of integration.
Schlüsselwörter (Keywords)
This dissertation focuses on government bond market integration, euro area periphery, sovereign debt crisis, financial integration, macroeconomic analysis, price-based measures, news-based measures, cointegration analysis, and the sustainability of the Euro project.
- Quote paper
- Marc Blunden (Author), 2010, An assessment of the current state of government bond market integration in the periphery of the euro area, Munich, GRIN Verlag, https://www.grin.com/document/307539
