ABSTRACT
International financial integration has increased significantly over the last decades, both at the regional level and at the global level. A greater degree of financial integration carries important implications for academic researchers, central bankers, financial regulators and international investors. For example, financial institutions monitor closely the degree of international comovement among bond and equity markets since this comovement determines the size of the benefits from international portfolio diversification. Financial regulators seek to understand the sources of shocks for domestic financial institutions, whereas central banks assess the impact of greater financial integration on the transmission of monetary policy. As a result, there is a significant demand for indicators of financial integration that are relatively easy to construct and interpret, based on publicly available data, and available for many countries and regions over time. This chapter reviews some of these indicators, describes the underlying datasets, and presents some illustrative evidence.
