Financial integration of NAFTA : measurement and analysis of the North American financial markets convergence / Yueming (Roy) Sun

Applying market arbitrage theory on daily data, we measure the empirical financial market convergence of NAFTA’s financial markets since 1994. Radar diagram and wavelet multi-resolution analysis (MRA) scalogram movies of the statistical moments of the term interest rate differentials visualize the multidimensional convergence. From the radar movies, we find: 1) a uniform disappearance of the average forward premia; 2) a non-uniform decline of bilateral financial market risk; 3) variation of bilateral financial market pressure measured by skewness; and 4) emergence of uniform market microstructures as measured by vanishing excess-kurtosis. From the MRA movies, we find that the national term structures of interest rates converge, since the stochastic resonance coefficients of the interest rate differentials lose significance: market energy at all frequencies dissipates into “white noise.” Testing Obrimah, Prakash and Rangan’s (2009) Lemma, we find that, after 2002, higher financial flow pressure is a necessary condition for lower financial market risk.

Authors

• Sun, Yueming (Roy)
• University of Lethbridge. Faculty of Management

• Canada. Treaties, etc. 1992 Oct. 7
• Free trade -- North America
• North America -- Economic integration
• Dissertations, Academic

Identifier

hdl:10133/2605

OAI identifier oai:identifier

oai:opus.uleth.ca:10133/2605