A comprehensive study examining European financial integration through the lens of sovereign bond yields, spanning nearly 140 years of financial history from the formation of the EEC to the present day.

Research Innovation

This project develops an alternative method for measuring financial integration using:

Eigendecomposition of time-dependent yield correlations
Analysis of sovereign bond datasets from 1872-2010
Comparison of standard yield spread analysis with novel eigenvalue-based measurements

Key Historical Findings

The analysis reveals significant integration periods following:

Single European Act (1987) - Early harmonization efforts
Maastricht Treaty (1993) - Foundation of the European Union
Euro Adoption (1999) - Monetary union implementation

The study also documents how global financial crises have “significantly degraded financial integration,” providing crucial insights for policymakers.

Methodology

Time-series analysis of sovereign bond yields across EU countries
Novel eigenvalue-based integration measurement technique
Historical comparison across multiple integration epochs
Statistical validation of integration patterns

Publication

The Race to the Bund: Aggregate European and State-Level Integration from the EEC to Present
Author: Michael James Bommarito II
Published on SSRN: April 2011

Academic Contribution

This work provides:

A new quantitative framework for measuring financial integration
Historical perspective on European economic convergence
Evidence of pre-Maastricht integration periods previously undocumented
Insights into the fragility of financial integration during crises