A NONPARAMETRIC APPROACH TO THE FINANCIAL CONVERGENCE IN THE EUROPEAN UNION

The paper studies the process of financial convergence in the EU, by using the stochastic Kernel density estimation. The analysis uses monthly data on the 10-year government bond yields from a number of 11 EU old Member States, and the period of analysis is 1980-2010. The paper finds evidence of convergence on long term and evidence of divergence on short term. The effects of the global financial crisis on the financial convergence are also debated. In subsidiary, the paper underlines the weak points of the traditional techniques in the convergence analysis as well as the advantages provided by the Kernel density estimation.