EU Financial Integration: Is There a 'Core Europe'? - Evidence from a Cluster-Based Approach

This paper identifies groups of financially integrated countries from a macro-level view. It innovates by applying an inter-temporal cluster analysis to eight euro area countries from 1995-2002. Our results indicate that euro countries were divided into two stable groups in the pre-EMU period. Back then, geographic proximity and country size might have played a role. This situation has changed remarkably with the introduction of the euro. The findings suggest as well that EU financial integration takes place in waves, and that there might exist maximum similarity barriers.