Econometric analysis of interconnections among stock markets of the new EU member states before and after the financial crisis

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JEL classification

• Financial Aspects of Economic Integration
• Financial Crises
• International Financial Markets

Keywords

Cointegration, financial crisis, financial integration, new EU member states, stock market

Abstract

During the recent financial and debt crisis, spillovers of shocks between stock markets occured, which negatively influenced national economies. Interconnections of stock markets is therefore of vital interest to central banks and scientific research. Previous research of the markets of the new EU member states, however, focused primarily on their integration with the global market or the euro-area. This article therefore investigates and describes interactions among markets of the new EU member states. Based on the results of correlation, cointegration and regression analysis and vector autoregression model, the article concludes that before the beginning of the crisis in 2007, national markets were rather affected by domestic information than by information from other countries. This changed after 2007, when the significance of information from other countries (especially from Hungary) sharply increased and the markets became sensitive to regional information.