Integration of international bond markets: did anything change with EMU?

Abstract

In a recent article, Barr and Priestley (2004) show that using a conditional asset pricing model that allows variation in the price of, and exposure to, risk, there is strong evidence that national markets are partially integrated into world markets. This letter extends their analysis to the European monetary union period. We show that the level of integration raised in all countries except in Japan, which experienced a deflation period.

Acknowledgement

We wish to acknowledge F. Coricelli, P. Pierani, T. Del Prete and R. Priestley for useful discussions. All errors and omissions remain our own.