Changes in the degree of financial integration within the European Community in the 1980s : Some econometric tests

Investigates the hypothesis of increased financial integration within the European Union (EU) based on an examination of covered and nominal interest rate differentials between March 1979 and August 1992 using cointegration and time‐varying parameter econometric techniques. Discovers evidence of increased financial integration from about 1983, although this is not universal for all countries within the EU. In particular the UK seems to have more financial independence, perhaps reflecting its non‐membership of the exchange rate mechanism, while Belgium is the country most closely tied to German monetary policy.