Testing the ‘trilemma’ in post-transition Europe – a new empirical measure of capital mobility

Globan, Tomislav

doi:10.1080/14631377.2014.964459

Cited by 5 publications

(4 citation statements)

References 26 publications

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“…That could lead to a reduction of cross-country asset substitutability and, consequently, of capital mobility. This argument is offered by Globan (2014) does not guarantee a smooth inflow of investment from abroad. Calvo (1998) shows how capital may suddenly stop flowing into the domestic economy with deleterious effects.…”

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confidence: 99%

The international policy trilemma in the post-Bretton Woods era

Mandilaras

2015

Journal of Macroeconomics

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The international macroeconomic policy trilemma suggests that despite the appeal of exchange rate stability, financial account openness and monetary sovereignty, these cannot be achieved simultaneously. Using elements of Euclidean geometry, this paper proposes a new method for testing the trilemma and finds considerable evidence in support of it. Further tests indicate that, on average, policy configurations are not on the trilemma constraint, i.e. there is a degree of 'trilemmaineffectiveness', which is costly for real output growth and price inflation. It is shown that these costs can be attributed to limited exchange rate stability and financial account openness.

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confidence: 99%

The international policy trilemma in the post-Bretton Woods era

Mandilaras

2015

Journal of Macroeconomics

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“…Another interesting fi nding is that fi scal variables (budget defi cit and public debt), market capitalization ratio and interest rates do not have a signifi cant impact on capital openness and FDI inward stock. Globan (2014) also found that capital fl ows are less sensitive to interest rates because of increased risk aversion on international capital markets.…”

Section: Resultsmentioning

confidence: 99%

“…They also constrain their investigation to just the EU15. Globan (2014) found an increase in the explanatory power of interest rates for capital movements shortly before and after the accession of post-transition economies to the EU, but the recent fi nancial crisis made capital fl ows less sensitive to interest rates because of increased risk aversion on international capital markets. Chinn and Ito (2008) created the Chinn-Ito index (KAOPEN) -it is an index measuring a country's degree of capital account openness.…”

Section: Literature Reviewmentioning

confidence: 99%

Empirical Evidence of Capital Mobility in the EU New Member States

Škabić

2016

Zagreb International Review of Economics and Business

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Abstract:This research is focused on the analysis of capital mobility indicators in the EU new member states as capital market union is one of the newest initiative in the EU. We found the most integrated countries are Hungary, the Czech R., Croatia and Estonia. Econometric analysis emphasized the main determinants of capital account openness and of FDI inward stock. The analysis indicates that the level of development, intra-EU trade and FDI inward stock have a positive impact on capital account openness (mobility), while infl ation has a negative infl uence. The GDP per capita, intra-EU trade and capital account openness have positive impact on FDI inward stock while infl ation and gross fi xed capital formation have negative infl uence. Unexpectedly, fi scal variables and interest rates do not have a significant impact on capital openness. The results show that there is room for improvement in all countries that would enable more favorable access to capital.

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“…Although economic theory would suggest that the interest rate be included in the model, the fact that the monetary policy framework in Croatia does not rely on the interest rate channel had led us to replace it with a more relevant measure of monetary policy stance (a similar approach was taken by Ljubaj, 2012). Additionally, investigating the response of net capital flows to interest rate shocks, Globan (2014) showed that among eight Central and East European countries responses to a domestic interest rate shock were ambiguous and in the 9 As a robustness check, we estimate a model including other relevant foreign variables that could affect capital flows (i.e. foreign interest rates and market volatility).…”

Section: Econometric Model and Datamentioning

confidence: 99%

Structure of capital flows and exchange rate: the case of Croatia

2018

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The paper analyses the impact of different types of capital flows to Croatia on the kuna exchange rate. SVAR models based on Cholesky decomposition with block exogeneity restrictions are estimated using different types of capital flows and the key finding is that the structure of capital flows matters for their impact on the exchange rate. On the one hand, debt capital inflows lead to kuna appreciation, irrespective of their maturity, while in terms of sectoral structure this is mostly due to corporate and government borrowing. On the other hand, equity capital flows seem to affect it in the opposite direction, which is in line with results from other empirical research. The opposite effects of debt and equity flows could stem from the differences in their relative orientations towards the tradable versus the non-tradable sector, with the latter being more prominent in debt flows. The paper also confirms that capital flows to the banking sector have no effect on the exchange rate, providing support to the intensive use of countercyclical macroprudential measures by the central bank. These findings are relevant for the design of monetary policy, especially in countries like Croatia where central bank uses the exchange rate of the kuna against the euro as the main tool for achieving its primary objective of price stability.

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Testing the ‘trilemma’ in post-transition Europe – a new empirical measure of capital mobility

Cited by 5 publications

References 26 publications

The international policy trilemma in the post-Bretton Woods era

The international policy trilemma in the post-Bretton Woods era

Empirical Evidence of Capital Mobility in the EU New Member States

Structure of capital flows and exchange rate: the case of Croatia

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