Regionalisation versus globalisation in European financial market integration: Evidence from co-integration analyses

Motivated by recent regulatory changes, this study investigates the degree of integration in retail lending in six core European Union (EU) countries using co-integration methodology which allows to investigate the presence a nd effects of structural breaks. While in the pre-break period we could det ect integration to a limited degree, the evidence for integration weakened in the post-1992 period. This could however reflect a convergence process, particularly with respect to spreads. This result is clearly a regional, no t a global phenomenon. As European lending rates are not yet fully integrat ed, the still segmented financial markets pose a challenge for a unified mo netary policy. (C) 2000 Elsevier Science B.V. All rights reserved. JEL classification: F36; G28; G15.