Abstract
This paper studies the dynamics of market integration in government bond markets. We utilise a new approach based on Pukthuanthong and Roll (2009) to investigate time-varying integration in 38 markets. We explore the impact of crisis periods, alongside differences in sample length, region, development and whether EMU and EU markets show obvious different integration from non-EU markets. Finally, we examine the effects of bonds' maturities on market integration. Considering the effects of factor heteroscedasticity and contagion during crisis periods, adjusted market integration is notably higher than implied by the Pukthuanthong and Roll (2009) measure. Developed markets experience increasing market integration over time, more than emerging markets. Most emerging markets provide little evidence of greater market integration. The EMU markets become almost fully integrated after the introduction of the Euro. Market integration also increases with maturity.
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