Capital mobility and EU enlargement

Buch, Claudia M.

doi:10.1007/bf02707388

Cited by 12 publications

(11 citation statements)

References 24 publications

(23 reference statements)

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“…These results confirm the hypotheses of Buch (1999) that the central and eastern European countries have already reached the same degree of integration into the world capital market like the EMU countries and that the accession process would likely not further increase the degree of capital mobility, since the CEEC-5 already have a higher degree of capital mobility than the EMU countries. That might be explained with efforts of the CEEC-5 not only to reduce barriers toward the European, but also toward the world capital market.…”

supporting

confidence: 85%

“…Taken this criticism into account and applying the FeldsteinHorioka test to other countries and periods however has not solved the FeldsteinHorioka paradox. Buch (1999) was the first that used the Feldstein-Horioka approach to measure the degree of international capital mobility in central and eastern European countries. In her seminal paper on capital mobility and EU enlargement, she estimated the degree of financial integration for a panel of central and eastern European countries (Czech Republic, Estonia, Hungary, Poland and Slovenia).…”

Section: Measuring Financial Market Integrationmentioning

confidence: 99%

“…5 Since saving and investment rates do not have the same degree of integration and the sample period is not sufficiently long, co-integration relationships between saving and investment rates could not be established. Following Buch (1999), we estimated equation (1) for this reason also in first differences. The regression results are presented at the bottom of Table 2.…”

mentioning

confidence: 99%

“…Following Buch (1999), we estimated equation (5) also in first differences to take account of the potential nonstationarity of the time-series. The regression results are presented at the bottom of Table 3.…”

mentioning

confidence: 99%

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International Capital Mobility and Current Account Targeting in Central and Eastern European Countries

Köhler¹

2006

Financial Development, Integration and Stability

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Die Discussion Papers dienen einer möglichst schnellen Verbreitung von neueren Forschungsarbeiten des ZEW. Die Beiträge liegen in alleiniger Verantwortung der Autoren und stellen nicht notwendigerweise die Meinung des ZEW dar.Discussion Papers are intended to make results of ZEW research promptly available to other economists in order to encourage discussion and suggestions for revisions. The authors are solely responsible for the contents which do not necessarily represent the opinion of the ZEW.Download this ZEW Discussion Paper from our ftp server:ftp://ftp.zew.de/pub/zew-docs/dp/dp0551.pdf Non-Technical SummaryIn May 2004, the Czech Republic, Hungary, Poland, the Slovak Republic and Slovenia (hereafter CEEC-5) joined the European Union (EU). Precondition for the accession was that the countries had met the political and economic criteria and adopted all policies and rules of the EU and to ensure their effective enforcement through appropriate administrative structures. Among these rules some require to remove all barriers that restrict the transfer of capital and services, since only the free flow of capital and services within the community makes it possible to take full advantage of the single market. Furthermore, the harmonization of financial market regulations has positive effects on monetary policy in an enlarged European Monetary Union (EMU), since different financial structures and levels of financial integration impede an efficient monetary policy by the European Central Bank (ECB). This not only endangers price level stability but also economic growth, since monetary impulses might have asymmetric effects on the economy in central and eastern European countries due to different structures and degrees of financial market integration.To measure this degree of integration the Feldstein-Horioka approach is used that analyzes the degree of financial integration in the CEEC-5 according to the correlation between saving and investment rates. To compare the degree of integration with that of the EMU eleven member countries are included into the regression. Since the results of the Feldstein-Horioka approach are sensitive to current account targeting policies of the government, we included the fiscal budget as additional variable into the regression to control for these kind of policies. We finally analyse the development of the current account of the CEEC-5 in greater detail to find out if the governments in these countries targeted the current account during the period in transformation.According to our analysis the degree of international capital mobility in the CEEC-5 has reached and even exceeded the degree of capital mobility in the euro zone. This development might be explained with the liberalization of capital flows towards the European and the world capital market during the transition period, while the EMU countries seem to have more concentrated on the removal of barriers within the euro area than toward the world capital market. These results are robust to current account targeting policies. Th...

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supporting

confidence: 85%

Section: Measuring Financial Market Integrationmentioning

confidence: 99%

mentioning

confidence: 99%

mentioning

confidence: 99%

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International Capital Mobility and Current Account Targeting in Central and Eastern European Countries

Köhler¹

2006

Financial Development, Integration and Stability

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“…In both studies results were in favor of the higher degree of the capital mobility inside the EU than between OECD members. Buch (1999) for example, in her study on the transition economies of the EU, found evidence of a similar degree of capital mobility in the transition economies of the EU compared to that of OECD countries and that less developed transition members of the EU have a higher level of correlation between investment and savings than more advanced transition economies. Heterogeneity b etween samples of countries, considered periods and employed econometric techniques bring contradictory results which continue to span debates on FHP.…”

Section: Introductionmentioning

confidence: 97%

The Feldstein–Horioka Puzzle and structural breaks: Evidence from EU members

Ketenci

2012

Economic Modelling

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The purpose of this paper is to investigate the level of capital mobility in European Union members using the Feldstein-Horioka puzzle proposed by Feldstein and Horioka (1980) in order to investigate relations between saving and investment flows. In this paper, data for 27 European countries were used over the period of 1995-2009 on the quarterly basis. Data were extracted from the official statistical site of the European Union, Eurostat. Firstly, unit root tests were applied to the series in order to estimate the stationarity of the model variables. Two different tests were used, which are the Ng and Perron (2001) unit root test procedure and approach proposed by Zivot and Andrews (1992) for unit root test allowing for a structural shift. Then the Bai and Perron (1998) structural break test was applied to determine the presence of structural breaks in series. In most countries except Belgium and Finland UDmax and WD max tests rejected the hypothesis of no breaks. Moreover, structural break locations for every series were selected by sequentially procedure, BIC and LWZ. Finally, the cointegration relationships between investment and saving flows of European Union members were tested. Three different cointegration techniques were applied to the data. Firstly, the Johansen (1988) cointegration approach was used for the case of no cointegration shifts, then the Gregory and Hansen (1996) cointegration test was applied, which allows for one structural shift. Finally, again the Johansen' cointegration approach was used; however, this time with the inclusion of dummy variables related to earlier selected structural break locations.The empirical results provided stronger evidence of cointegration between investment and saving variables in the case of structural break accommodation compared to the case where the presence of structural breaks was ignored. In most cases of estimations saving-investment correlation has a tendency to increase with regime changes. However, the estimated saving retention coefficient in the presence of structural breaks using the Bai and Perron (1998) approach appeared relatively low in many cases, illustrating by this the openness of estimated countries. In general, world and European countries with time have a tendency to a higher level of their capital market openness. According to Feldstein and Horioka (1980), a higher saving-investment correlation is related to lower capital mobility. Therefore, the contradicting results between saving retention coefficient estimates and cointegration tests illustrate that cointegration indicates a rather current account solvency condition than capital mobility. Estimations of a saving retention coefficient in the presence of structural changes do not support the existence of the Feldstein-Horioka Puzzle in the considered EU countries. JEL: F32Key Words: F eldstein-Horioka puzzle, saving-investment a ssociation, capital mobility, cointegration, structural breaks, EU. Another direction is related to attempts to provide evidence that the results of...

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Is Eastern Enlargement of the European Union a Beneficial Investment for Germany?

Wood¹

2003

Political Science Quarterly

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Capital mobility and EU enlargement

Cited by 12 publications

References 24 publications

International Capital Mobility and Current Account Targeting in Central and Eastern European Countries

International Capital Mobility and Current Account Targeting in Central and Eastern European Countries

The Feldstein–Horioka Puzzle and structural breaks: Evidence from EU members

Is Eastern Enlargement of the European Union a Beneficial Investment for Germany?

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