Financial Integration in some countries of South America. The Use of Interest Parity Conditions as Indicators

Viena, Austria

Conferencia; 7th Annual Conference of the International Association for Comparative Studies in Economics and Integration (Arnoldshain VII Seminar); 2006

International Society for Comparative Economic Studies

The objective of this paper is to measure the degree of financial integration in some countries of South America. A simple way of observing how economies are financially integrated is taking into account specific variables that reflect the properties of each financial system. It is known that, as markets become more open and unified, differences in rates of return should only show fundamental factors such as asset quality, risk, and the like. As a measure of financial integration we use the uncovered interest rate parity. Additionally, we prove the co-integration between the variables involved as a measure of a long run financial integration.