Capital Flows and Speculative Attacks in Prospective EU Member States
AbstractThis paper examines the capital flow experience of transition economies who are also prospective EU members with a view to shedding light on the likely problems they might encounter with exchange rate policy in the run up to euro area membership. We show that they have been experiencing fairly sizeable capital flows since the early 1990s. We explain these flows using two separate models. The first explains the level of capital flows using panel data from the prospective EU members. The second concentrates specifically on estimating the probability of a country experiencing downward speculative pressure. In both cases, the contribution of domestic factors and contagion is explored. The results suggest that while domestic factors have some role to play, it is rather limited. Moreover there is clear evidence of contagion effects, suggesting that macroeconomic policy in the prospective EU members will be complicated by capital flows in the run up to euro area membership.
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Bibliographic InfoPaper provided by Bank of Greece in its series Working Papers with number 06.
Length: 35 pages
Date of creation: Oct 2003
Date of revision:
Publication status: Published in Economics of Transition, 2004, 12 (3), pp.559-586.
capital flows; transition economies; accession countries and EU membership;
Other versions of this item:
- Heather D. Gibson & Euclid Tsakalotos, 2004. "Capital flows and speculative attacks in prospective EU member states," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 12(3), pages 559-586, 09.
- F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
- F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
- P20 - Economic Systems - - Socialist Systems and Transition Economies - - - General
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