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Journal Articles Economica Year : 2008

Financial Integration, GDP Correlation and the Endogeneity of Optimum Currency Areas

Abstract

The paper analyses the relationship between trade, financial integration and business cycle synchronization in the euro area. The introduction of the euro has had a noticeable impact on European financial markets. Evidence that capital market integration exerts a positive effect on output correlation has two major implications. First, it corroborates the hypothesis of the endogeneity of optimum currency areas, whereby after joining a monetary union countries better meet standard OCA criteria; second, it provides European policy-makers with yet another reason to pursue financial integration in the euro area (and in prospective members as well).
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Dates and versions

hal-01022326 , version 1 (10-07-2014)

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Stefano Schiavo. Financial Integration, GDP Correlation and the Endogeneity of Optimum Currency Areas. Economica, 2008, 75, pp.168-189. ⟨10.1111/j.1468-0335.2007.00598.x⟩. ⟨hal-01022326⟩
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