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Dynamics of Equity Market Integration in Europe: Impact of Political Economy Events
Author(s) -
AGGARWAL RAJ,
LUCEY BRIAN,
MUCKLEY CAL
Publication year - 2010
Publication title -
jcms: journal of common market studies
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.54
H-Index - 90
eISSN - 1468-5965
pISSN - 0021-9886
DOI - 10.1111/j.1468-5965.2010.02067.x
Subject(s) - equity (law) , european union , interdependence , market integration , politics , european monetary union , economics , economic and monetary union , european integration , political union , european monetary system , monetary policy , international economics , political science , macroeconomics , law
Unlike most prior literature in finance and economics, this article focuses on events in the political economy and examines the integration of European equity markets over the 1988 through 2002 period using two innovative techniques that assess how the level of integration in equity price indices changes over time. The results show that notwithstanding the rising interdependencies between the European and US equity markets during the mid‐ to late 1990s, the long‐run integrative relationships governing the European markets strengthen only in the late 1980s. This evidence suggests that despite several years of political willingness by European leaders to integrate economies, the equity markets only responded to the Delors Report (1989) and the Strasbourg Declaration (1989) that the European Economic Community would move towards European Monetary Union, but they provided little positive long‐run response to subsequent developments pertaining to European Monetary Union.