Izaguirre, O.F.; Shin, S.; Zirek, D. Trade Agreements and Financial Market Integration in Latin America and the US. J. Risk Financial Manag.2024, 17, 126.
Izaguirre, O.F.; Shin, S.; Zirek, D. Trade Agreements and Financial Market Integration in Latin America and the US. J. Risk Financial Manag. 2024, 17, 126.
Izaguirre, O.F.; Shin, S.; Zirek, D. Trade Agreements and Financial Market Integration in Latin America and the US. J. Risk Financial Manag.2024, 17, 126.
Izaguirre, O.F.; Shin, S.; Zirek, D. Trade Agreements and Financial Market Integration in Latin America and the US. J. Risk Financial Manag. 2024, 17, 126.
Abstract
The primary objective of this study is to examine the extent of financial integration between Latin American and US financial markets, particularly in light of recent efforts to foster integration through trade agreements. Spanning from January 1, 1990, to December 31, 2019, the sample focuses on major market indices and key sectors. Financial integration is quantified using a DCC multivariate GARCH model, incorporating a smooth transition model, structural breaks, and regression-based approaches. Results indicate increased comovement with the US for main market indices in Argentina, Chile, Colombia, Mexico, and Peru, while Brazil shows a decrease. Similar trends are observed in sectoral analyses. The study also reveals heightened correlation post-trade agreements. Structural break analysis highlights significant shifts in dynamic correlations for countries with US free trade agreements. These findings support the argument of increased financial integration, bearing significance for portfolio diversification and international policy formulation.
Keywords
trade agreements; international financial integration; comovement; emerging economies; Latin America
Subject
Business, Economics and Management, Finance
Copyright:
This is an open access article distributed under the Creative Commons Attribution License which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.
