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Capital Account Liberalization, Capital Flow Patterns, and Policy Responses in the EU's New Member States
Author:
Ms. Zsofia Arvai
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Series:
IMF Working Papers
Volume/Issue:
Volume 2005: Issue 213
Language:
English
Publication Date:
01 Nov 2005
DOI:
https://doi.org/10.5089/9781451862324.001
ISBN:
9781451862324
ISSN:
1018-5941
Pages:
42
Keywords:
WP; monetary policy; portfolio inflow; interest rate differential; central bank; debt management; EU accession; capital flows; capital account liberalization; transition country; transmission mechanism; liberalization strategy; candidate country; country authorities' agenda; EU candidate country; market share; country's liberalization strategy; government securities market; Central European country; Capital account; Capital inflows; Baltics
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IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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This paper discusses the experience of the EU's eight new member countries (EU8) between 1995 and 2003 when the bulk of capital account liberalization took place, focusing on interest-rate-sensitive portfolio flows and financial flows. It takes stock of the lessons from capital flow patterns to draw policy conclusions. There were two distinct groups in terms of the speed of capital account liberalization: rapid liberalizers and cautious liberalizers. The speed of disinflation and the level of public debt were major determinants of the size of interest-rate-sensitive portfolio inflows. Monetary and exchange rate policies were the main instruments used to react to large interest-sensitive inflows, whereas fiscal tightening was seldom used as a direct reaction to inflows.
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Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund