Financial development convergence: New evidence for the EU

Abstract

This paper aims to investigate whether the banking and stock market measures among European Unioncountries have been subject to a convergence process in order to verify whether the transition from theEuropean Monetary System to the Single Currency in the lastŞve decades have led to the integration ofŞnancial markets. We show that banking and stock market measures tend to converge across the EU overtime, and the process is even improved by controlling for the quality of country level institutions and arange of macroeconomic variables. We conclude that there is a degree of success in theŞnancial integration process of EU countries and therefore recommend that the EU acceleratesŞnancial integration tocompletion rather than to slowing the process.© 2017 Central Bank of The Republic of Turkey. Production and hosting by Elsevier B.V. This is an openaccess article under the CC BY-NC-ND license (http://creativecommons.org/licenses/by-nc-nd/4.0/)