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Capital Flows to EU New Member States; Does Sector Destination Matter?


  • Pritha Mitra


The recent boom-bust episode in Emerging Europe was largely the product of surges and sudden stops in capital inflows. This paper empirically argues that the sectors into which capital flows determines their impact on GDP growth. Applying data from EU New Member States, it is found that capital flows into real estate have a greater impact on swings in GDP than other sectors, irrespective of a country's exchange rate or fiscal policy. Consequently, as new waves of capital inflows spread to emerging markets, policies may usefully focus on supporting capital inflows towards economic sectors that minimize large swings in GDP.

Suggested Citation

  • Pritha Mitra, 2011. "Capital Flows to EU New Member States; Does Sector Destination Matter?," IMF Working Papers 11/67, International Monetary Fund.
  • Handle: RePEc:imf:imfwpa:11/67

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    References listed on IDEAS

    1. Valerie Cerra & Sweta Chaman Saxena, 2008. "Growth Dynamics: The Myth of Economic Recovery," American Economic Review, American Economic Association, vol. 98(1), pages 439-457, March.
    2. Driscoll, John C., 2004. "Does bank lending affect output? Evidence from the U.S. states," Journal of Monetary Economics, Elsevier, vol. 51(3), pages 451-471, April.
    3. Martin, Philippe & Ann Rogers, Carol, 2000. "Long-term growth and short-term economic instability," European Economic Review, Elsevier, vol. 44(2), pages 359-381, February.
    4. Benito, Andrew & Mumtaz, Haroon, 2009. "Excess Sensitivity, Liquidity Constraints, And The Collateral Role Of Housing," Macroeconomic Dynamics, Cambridge University Press, vol. 13(03), pages 305-326, June.
    5. Ozturk, I., 2007. "Foreign Direct Investment – Growht Nexus: A Review of The Recent Literature," International Journal of Applied Econometrics and Quantitative Studies, Euro-American Association of Economic Development, vol. 4(2), pages 79-98.
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    Cited by:

    1. repec:agr:journl:v:2(602):y:2015:i:2(602):p:223-236 is not listed on IDEAS
    2. Petris Sorina, 2012. "Capital Flows And Their Sectoral Destinations," Annals of Faculty of Economics, University of Oradea, Faculty of Economics, vol. 1(1), pages 825-829, July.
    3. Mara Pirovano, 2013. "Household and firm leverage, capital flows and monetary policy in a small open economy," Working Paper Research 246, National Bank of Belgium.
    4. Marinela GEAMĂNU, 2015. "Analysis of the evolution of foreign direct investment in the European Union, amid the global economic crisis," Theoretical and Applied Economics, Asociatia Generala a Economistilor din Romania - AGER, vol. 0(2(603), S), pages 223-236, Summer.
    5. repec:sgm:resrep:v:2:i:22:y:2016:p:201-212 is not listed on IDEAS

    More about this item


    Consumption; Central and Eastern Europe; Czech Republic; Capital flows; Bulgaria; Estonia; Emerging markets; Latvia; Lithuania; Hungary; Romania; Poland; Crisis; and Slovak Republic.; real estate; capital inflows; net capital flows; International Finance: General; Open Economy Macroeconomics; And Slovak Republic;

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