Document Type
Article
Publication Date
12-27-2023
Subject: LCSH
Euro, Stock exchanges, International finance
Disciplines
Finance and Financial Management
Abstract
Abstract The euro was launched, on 1 January 1999, as a common currency for members of the European Union that complied with the Maastricht Treaty. The Maastricht Treaty calls for the coordination of major macroeconomic policies, such as inflation, budget balance, public debt, and long-term interest rates. Theoretically, the coordination of these policy issues and the launch of a common currency will increase the degree of market integration among member countries. This paper empirically tests the impact of the euro on the degree of market integration by looking at the comovement of the European equity markets and a sample of OECD equity markets. Weekly stock market indices for the period covering seven years before the euro and seven years after the euro was implemented was used. The results show that cross-country divergences in stock markets continued after the euro. There is no evidence of cointegration after the adoption of the euro. Cross-country portfolio diversification continues to be beneficial even among euro countries.
DOI
https://doi.org/10.3390/economies12010008
Creative Commons License
This work is licensed under a Creative Commons Attribution 4.0 International License.
Repository Citation
Ejara, D.D.; Upadhyaya, K. An Empirical Study of the Impact of the Euro on Cross-Country Diversification. Economies 2024, 12, 8. https://doi.org/10.3390/economies12010008
Publisher Citation
Ejara, D.D.; Upadhyaya, K. An Empirical Study of the Impact of the Euro on Cross-Country Diversification. Economies 2024, 12, 8. https://doi.org/10.3390/economies12010008
Comments
This article belongs to the Collection International Financial Markets and Monetary Policy. It was originally published in Economies, volume 12, issue 1.
© 2023 by the authors. Licensee MDPI, Basel, Switzerland. This article is an open access article distributed under the terms and conditions of the Creative Commons Attribution (CC BY) license (https://creativecommons.org/licenses/by/4.0/).