Trade Agreements and Financial Market Integration in Latin America and the US

Obed Fernando Izaguirre, Seungho Shin, Duygu Zirek

Research output: Contribution to journalArticlepeer-review


The primary objective of this study is to examine the extent of financial integration between Latin American and US financial markets, particularly in light of recent efforts to foster integration through trade agreements. Spanning from 1 January 1990 to 31 December 2019, the sample focuses on major market indices and key sectors. Financial integration is quantified using a DCC multivariate GARCH model, incorporating a smooth transition model, structural breaks, and regression-based approaches. Results indicate increased comovement with the US for main market indices in Argentina, Chile, Colombia, Mexico, and Peru, while Brazil shows a decrease. Similar trends are observed in sectoral analyses. This study also reveals heightened correlation post-trade agreements. Structural break analysis highlights significant shifts in dynamic correlations for countries with US free trade agreements. These findings support the argument of increased financial integration, bearing significance for portfolio diversification and international policy formulation.

Original languageEnglish
Article number126
JournalJournal of Risk and Financial Management
Issue number3
StatePublished - Mar 2024


  • comovement
  • emerging economies
  • international financial integration
  • Latin America
  • trade agreements


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