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Capital Flows and Speculative Attacks in Prospective EU Member States

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Author Info
Heather D Gibson () (Bank of Greece, Economic Research Department)
Euclid Tsakalotos (Athens University of Economics and Business)

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Abstract

This 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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Publisher Info
Paper provided by Bank of Greece in its series Working Papers with number 06.

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Length: 35 pages
Date of creation: Oct 2003
Date of revision:
Publication status: Published in Economics of Transition, 2004, 12 (3), pp.559-586.
Handle: RePEc:bog:wpaper:06

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Web page: http://www.bankofgreece.gr
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Related research
Keywords: capital flows; transition economies; accession countries and EU membership;

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Find related papers by JEL classification:
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

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

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  2. Montiel, Peter & Reinhart, Carmen M., 1999. "Do capital controls and macroeconomic policies influence the volume and composition of capital flows? Evidence from the 1990s," Journal of International Money and Finance, Elsevier, vol. 18(4), pages 619-635, August. [Downloadable!] (restricted)
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  5. Meyer, Bruce D, 1990. "Unemployment Insurance and Unemployment Spells," Econometrica, Econometric Society, vol. 58(4), pages 757-82, July. [Downloadable!] (restricted)
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  6. Ayuso, Juan & Perez-Jurado, Maria, 1997. "Devaluations and Depreciation Expectations in the EMS," Applied Economics, Taylor and Francis Journals, vol. 29(4), pages 471-84, April. [Downloadable!] (restricted)
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  9. Giavazzi, Francesco & Pagano, Marco, 1986. "The Advantages of Tying One's Hands: EMS Discipline and Central Bank Credibility," CEPR Discussion Papers 135, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  10. Ramon Moreno, 1995. "Macroeconomic behavior during periods of speculative pressure or realignment: evidence from Pacific Basin economies," Pacific Basin Working Paper Series 95-05, Federal Reserve Bank of San Francisco. [Downloadable!]
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  14. Chen, Zhaohui & Giovannini, Alberto, 1997. "The determinants of realignment expectations under the EMS: Some empirical regularities," European Economic Review, Elsevier, vol. 41(9), pages 1687-1707, December. [Downloadable!] (restricted)
  15. Heather D. Gibson, 2003. "Realignment probabilities and reputation effects in the EMS," Oxford Economic Papers, Oxford University Press, vol. 55(2), pages 314-335, April.
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  17. Edin, Per-Anders & Vredin, Anders, 1993. "Devaluation Risk in Target Zones: Evidence from the Nordic Countries," Economic Journal, Royal Economic Society, vol. 103(416), pages 161-75, January. [Downloadable!] (restricted)
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  18. Jenkins, Stephen P, 1995. "Easy Estimation Methods for Discrete-Time Duration Models," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 57(1), pages 129-38, February.
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Stephen Hall & George Hondroyiannis, 2006. "Measuring the correlation of shocks between the EU15 and the new member countries," Economic Change and Restructuring, Springer, vol. 39(1), pages 19-34, June. [Downloadable!] (restricted)
    Other versions:
  2. Eleni Angelopoulou, 2005. "The Comparative Performance of Q-type and Dynamic Models of Firm Investment: Empirical Evidence from the UK," Working Papers 27, Bank of Greece. [Downloadable!]
  3. Christos Papazoglou, 2005. "Real Exchange Rate Dynamics and Output Contraction under Transition," Working Papers 29, Bank of Greece. [Downloadable!]
  4. Theodoros S. Papaspyrou, 2004. "EMU Strategies: Lessons from Past Experience in View of EU Enlargement," Working Papers 11, Bank of Greece. [Downloadable!]
  5. Heather D. Gibson & Nicholas T. Tsaveas & Thomas Vlassopoulos, 2006. "Capital Flows, Capital Account Liberalisation and the Mediterranean Countries," Working Papers 33, Bank of Greece. [Downloadable!]
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