A factor analysis approch to measuring European loan and bond market integration

Wagenvoort, Rien; Ebner, André und Morgese Borys, Magdalena (November 2009): A factor analysis approch to measuring European loan and bond market integration. Münchener Wirtschaftswissenschaftliche Beiträge (VWL) 2009-20

Abstract

By using an existing and a new convergence measure, this paper assesses whether bank loan and bond interest rates are converging for the non-financial corporate sector across the euro area. Whilst we find evidence for complete bond market integration, the market for bank loans remains segmented, albeit to various degrees depending on the type and size of the loan. Factor analysis reveals that rates on large loans and small loans with long rate fixation periods have weakly converged in the sense that, up to a fixed effect, their evolution is driven by common factors only. In contrast, the price evolution of small loans with short rate fixation periods is still affected by country-specific dynamic factors. There are few signs that bank loan rates are becoming more uniform with time.

• Dokumententyp: Paper
• Keywords: financial market integration, corporate loan, corporate bond, panel unit root test, factor analysis
• Fakultät: Volkswirtschaft ; Volkswirtschaft > Munich Discussion Papers in Economics ; Volkswirtschaft > Munich Discussion Papers in Economics > Finanzmärkte
• Themengebiete: 300 Sozialwissenschaften > 300 Sozialwissenschaft, Soziologie ; 300 Sozialwissenschaften > 330 Wirtschaft
• JEL Classification: C12, C23, G12, G2
• Sprache: Englisch

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