Date of Award
Doctor of Philosophy
Counselor Education and Counseling Psychology
Dr. Mary Z. Anderson
Dr. Patrick H. Munley
Dr. Gunilla Holm
During the last two decades, the degree of international financial integration (IFI) has increased substantially. This increased level of IFI has a number of benefits. First, it can lead to more efficient allocation of saving and investment across countries and, therefore, facilitate consumption smoothing. Second, it can enable domestic investors to achieve a higher level of diversification. Third, the industrial sector can benefit from having better access to the world’s capital supply and, eventually an increase in the level of IFI will have a positive impact on countries’ output growth. In all, higher levels of IFI can lead to a more efficient economy and ultimately to a higher level of economic wellbeing.
This dissertation consists of three essays, each presenting different approaches for measuring the degree of IFI across countries. Different from the vast empirical literature we focus mainly on analyzing the behavior across international bond market returns rather than the behavior across international stock market returns. In the first essay, we study the dependence structure among international bond returns by focusing on two common approaches: (1) rolling correlations, and (2) cointegration analysis. How the observed increase in the dependence structure across the international bond market is reflected in business cycles is also analyzed. In the second essay, the level of IFI is investigated by testing for the presence of a common volatility process across international bond market returns. In the third essay, a dynamic measure of IFI is obtained. The saving-investment relationship and cross-country correlations also are used in this essay to determine the degree of capital mobility across countries. In this way, we are able to compare the benefits of using the new time-varying measure of IFI to these two traditional measures.
In conclusion, we find an increase in the level of IFI especially across major EU country members beginning in the mid-1990s. However, during the last three to four years there is some evidence that this integration may be trending downward. The results with regard to the U.K suggest that the U.K. is not highly integrated with the European countries, or with the rest of the world.
Beliu, Sonila, "International Financial Integration" (2005). Dissertations. 1017.