ABSTRACT
In this chapter, the author begins with a short description of the basic concepts of integration of capital markets, including of course the various barriers to movement and the advantages. He sketches out the European regulatory environment for capital market integration. The author describes the progress of integration measured by different types of private international capital market transactions. He draws attention to foreign direct investment (FDI). The author explains the logic of international production. He describes some stylised facts how FDI has developed in the European Union under conditions of integration; highlighting both sectoral and geographical patterns. The author discusses the theoretical foundations and two important indicators of the degree of integration, namely, the volume of international transactions, and the equalisation of interest rates, that is, of the price of capital. He explains the patterns of other international movements of capital mainly in the form of long-term loans.
