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Unrecorded capital flows and accumulation of foreign assets: the case of Croatia


  • Goran Vuksic

    (Institute of Public Finance, Zagreb)


This paper evaluates the magnitude of unrecorded capital flows and the resulting unrecorded accumulation of foreign assets for Croatia, over the period between 2000 and 2007. The problem of unrecorded capital outflows, often labeled as capital flight, has gained significance in the present global financial and economic crises, because of increasing capital scarcity in many emerging markets and transition economies including Croatia. The findings reveal relatively large amounts of unrecorded foreign asset accumulation over the observed period. A large portion of this accumulation relates to cumulative amounts of net errors and omissions term, which is interpreted as unrecorded capital flow. There are reasons to believe that this net errors and omissions item in Croatia possibly partly represents the unrecorded accumulation of foreign cash from foreign tourist spending, and/or partly results from overstated tourism income in the official statistics. However, even after excluding this item from the calculation of capital flight, the remaining unrecorded accumulation of foreign assets over the period is still substantial. Consequently, if these unrecorded flows are taken into account, Croatia’s net international investment position is improved.

Suggested Citation

  • Goran Vuksic, 2010. "Unrecorded capital flows and accumulation of foreign assets: the case of Croatia," Financial Theory and Practice, Institute of Public Finance, vol. 34(1), pages 1-23.
  • Handle: RePEc:ipf:finteo:v:34:y:2010:i:1:p:1-23

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    References listed on IDEAS

    1. Lane, Philip R. & Milesi-Ferretti, Gian Maria, 2001. "The external wealth of nations: measures of foreign assets and liabilities for industrial and developing countries," Journal of International Economics, Elsevier, vol. 55(2), pages 263-294, December.
    2. Chang, P H Kevin & Claessens, Stijn & Cumby, Robert E, 1997. "Conceptual and Methodological Issues in the Measurement of Capital Flight," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 2(2), pages 101-119, April.
    3. Helmut Stix, 2008. "Euroization: What Factors drive its Persistence?," Working Papers 140, Oesterreichische Nationalbank (Austrian Central Bank).
    4. Claessens, Stijn & Naude, David, 1993. "Recent estimates of capital flight," Policy Research Working Paper Series 1186, The World Bank.
    5. Eggerstedt, Harald & Hall, Rebecca Brideau & Van Wijnbergen, Sweder, 1995. "Measuring capital flight: A case study of Mexico," World Development, Elsevier, vol. 23(2), pages 211-232, February.
    6. Hermes, Niels & Lensink, Robert & Murinde, Victor, 2002. "Flight Capital and its Reversal for Development Financing," WIDER Working Paper Series 099, World Institute for Development Economic Research (UNU-WIDER).
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    capital flows; capital flight; euroization; Croatia;


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