Financial and Trade Integration of Selected EU Regions: Dynamic Correlation and Wavelet Approach
Financial and Trade Integration of Selected EU Regions: Dynamic Correlation and Wavelet Approach

Summary/Abstract: We evaluate the process of financial and trade integration in 26 European Union (EU) countries over the period 1993 – 2012. We distinguish between “new” and “old” EU countries to compare the processes of financial and trade integration in the developed countries and formerly central-planned economies. We use classical and moving correlation, dynamic correlation, and wavelet co-spectrum. Classical and moving correlation shows the strong relation until 2008. Dynamic correlation confirms strong relation for long and business cycle frequencies. Specification via wavelet co-spectrum reveals that long frequencies are correlated in the period 2000 – 2009, business cycle frequencies in the period 1993 – 1994 and 2003 – 2004 and middle frequencies generally in the period 2008 – 2010. The process of financial integration was stronger in the old EU member countries while the process of trade integration in the new member countries.

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