FINANCIAL INTEGRATION IN THE EUROPEAN UNION - THE IMPACT OF THE CRISIS ON THE BOND MARKET

• Published in: Equilibrium (Toruń ) 2017-06, Vol.12 (2), p.195-210
• Main Authors: Vuković, Darko, Hanic, Edin, Hanić, Hasan
• Format: Article
• Language: English
• Subjects: Bond issues; Bond markets; Capital markets; Economic crisis; Economic impact; Economy; European Monetary Union; Eurozone; Government bonds; Impact analysis; Interest rates; Money market instruments; Risk premiums; Securities markets; Sovereign debt; Standard deviation; Supranational / Global Economy; Volatility
• ISSN: 1689-765X; 2353-3293
• DOI: 10.24136/eq.v12i2.10

Research background: In our paper we have analyzed the influence of the crisis on the financial integration in the European Monetary Union. We have analyzed EMU capital market to show the impact of the crisis, with the focus on the bonds market. The determinants of the research are yields and standard deviations on medium-term and long-term triple-A bond markets, as well as CDS medium-term premiums. Purpose of the article: The aim of this paper is to show the volatility of researched deter-minants in periods of crisis in EMU zones. Methods: As a model we used a modified theoretical CAL portfolio model. In the last fifteen years Europe has been faced with two major crises: the world economic crisis and sovereign debt crisis. Findings Value added: We believe that the sovereign crisis hit EMU more, leaving the deeper implications on the financial integration. Our analysis has showed that the crisis had a major impact on the financial integration. Yields and standard deviations increased multiply in periods of crisis and left the impact of volatility on the capital market. However, the degree of convergence of euro area bond markets largely stabilized in last two years.