Capital Flows and Speculative Attacks in Prospective EU Member States

Heather Gibson and Euclid Tsakalotos
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Euclid Tsakalotos: Athens University of Economics and Business

No 6, Working Papers from Bank of Greece

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.

Keywords: capital flows; transition economies; accession countries and EU membership (search for similar items in EconPapers)
JEL-codes: F32 F36 P20 (search for similar items in EconPapers)
Pages: 35 pages
Date: 2003-10
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

Published in Economics of Transition, 2004, 12 (3), pp.559-586.

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Journal Article: Capital flows and speculative attacks in prospective EU member states (2004)
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