Testing the ‘trilemma’ in post-transition Europe – a new empirical measure of capital mobility
TL;DR: In this article, the authors developed a new empirical measure of capital mobility by measuring the reaction intensity of capital flows, which can be used to measure the degree of mobility of capital.
Abstract: This article develops a new empirical measure of capital mobility. It tests the hypothesis that the degree of capital mobility can be estimated by measuring the reaction intensity of capital flows ...
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TL;DR: In this article, 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, and the authors propose a new method for testing the trilemmata and find considerable evidence in support of it.
11 citations
Additional excerpts
...This argument is offered by Globan (2014) who uses trilemma deviations as a measure of capital mobility for 11 European post-transition economies....
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01 Jan 2015
TL;DR: The exchange rate regime comprises the exchange rate arrangement and a number of complementary policies, including possible capital controls and monetary policy as mentioned in this paper, which can lead to more variability of output and employment.
Abstract: The exchange rate regime comprises the exchange rate arrangement and a number of complementary policies, including possible capital controls and monetary policy. The normative choice of an appropriate exchange rate regime must take into account many factors. Fixed exchange rates facilitate international trade, but may lead to more variability of output and employment. For emerging-market and transition economies, other factors such as export competitiveness, disinflation policies, maintenance of low inflation, and the credibility and administrative capacity of the authorities may be equally important. These features differ across countries and change over time. Empirical studies suggest that numerous factors are of importance for the choice of exchange rate regime, but also that the effects of the choice are difficult to pin down.
3 citations
TL;DR: In this article, the impact of different types of capital flows on the exchange rate in a small open economy using Croatian data is analyzed. And the authors find that the structure of capital flow matters for their impact on exchange rate.
Abstract: The paper analyses the impact of different types of capital flows on the exchange rate in a small open economy using Croatian data. We estimate structural vector autoregressive models based on Cholesky decomposition with block exogeneity restrictions using different types of capital flows and find 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, there is some evidence that equity capital inflows lead to kuna depreciation, which could stem from their stronger orientation towards the tradable sector. The results also indicate that capital flows to the banking sector have no effect on the exchange rate, providing support for the use of countercyclical measures by the central bank.
3 citations
TL;DR: In this article, the authors focused on the analysis of capital mobility indicators in the EU new member states as capital market union is one of the newest initiative of the EU and found the most integrated countries are Hungary, the Czech R., Croatia and Estonia.
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 inflation has a negative influence. The GDP per capita, intra- EU trade and capital account openness have positive impact on FDI inward stock while inflation and gross fixed capital formation have negative influence. Unexpectedly, fiscal 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. JEL Classification: F21, F43
2 citations
Cites background from "Testing the ‘trilemma’ in post-tran..."
...König and Ohr (2013) created an index for the measurement of European economic integration which consists of four components one of them being EU single market....
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...Globan (2014) also found that capital fl ows are less sensitive to interest rates because of increased risk aversion on international capital markets....
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...Kucerova Z. (2009) starts with the thesis that “full fi nancial market integration is one of the inevitable conditions for successful introduction of common currency, so the currency could circulate within the monetary union without any barriers....
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...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…...
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01 Jan 2019
TL;DR: In this paper, the authors investigated the causes of the UK's departure from the European Union (EU) and the possible future of the EU by examining three trilemmas, namely, the Mundell-Fleming Trilemma, the Monetary Union Trilemmma, and Rodrik's political trilemma.
Abstract: The UK’s departure from the European Union (EU) will increase political and economic instability on both sides of the English Channel. It also adds economic strain on the remaining members of the bloc. This chapter investigates the causes of the departure of the United Kingdom and Northern Ireland (hereafter the UK) from the European Union (EU) bloc, and the possible future of the EU. This will be done, first, by examining three trilemmas, namely, the Mundell-Fleming Trilemma, the Monetary Union Trilemma, and Rodrik’s political trilemma. The chapter will then look at the history of the UK with regard to the EU, especially with respect to the conversion of the common market to a political state and how this affects the aforementioned trilemmas. Finally, it examines economic and political possibilities of the EU after the UK leaves, by analyzing the reports and documents issued by the EU and private investment banks.
1 citations
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TL;DR: In this article, the authors interpret fluctuations in GNP and unemployment as due to two types of disturbances: disturbances that have a permanent effect on output and disturbances that do not, and they interpret the first as supply disturbances, the second as demand disturbances.
Abstract: We interpret fluctuations in GNP and unemployment as due to two types of disturbances: disturbances that have a permanent effect on output and disturbances that do not. We interpret the first as supply disturbances, the second as demand disturbances. Demand disturbances have a hump-shaped mirror-image effect on output and unemployment. The effect of supply disturbances on output increases steadily over time, peaking after two years and reaching a plateau after five years.
2,711 citations
TL;DR: In this article, the authors construct estimates of external assets and liabilities for 145 countries for the period 1970-2004, focusing on trends in net and gross external positions, and the composition of international portfolios.
Abstract: We construct estimates of external assets and liabilities for 145 countries for the period 1970-2004. We describe our estimation methods and present key features of the data at the country and the global level. We focus on trends in net and gross external positions, and the composition of international portfolios, distinguishing between foreign direct investment, portfolio equity investment, official reserves, and external debt. We document the increasing importance of equity financing and the improvement in the external position for emerging markets, and the differing pace of financial integration between advanced and developing economies. We also show the existence of a global discrepancy between estimated foreign assets and liabilities, and identify the asset categories that account for this discrepancy.
2,536 citations
"Testing the ‘trilemma’ in post-tran..." refers methods in this paper
...…459–476, http://dx.doi.org/10.1080/14631377.2014.964459 also been used in the literature, e.g. the volume of gross capital flows (Calvo et al. 1993, Lane and Milesi-Ferretti 2007), the degree of monetary policy autonomy (Cumby and Obstfeld 1984, Dowla and Chowdhury 1991), testing the Euler…...
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TL;DR: In this paper, the authors analyzed the international capital market and analyzed a wide range of issues including the nation's optimal rate of saving and the incidence of tax changes and found that saving that originates in a country remains 'to be invested there'.
Abstract: How internationally mobile is the world's supply of capital? Does capital flow among industrial countries to equalize the yield to investors? Alternatively, does the saving that originates in a country remain 'to be invested there? Or does the truth lie somewhere between these two extremes? The answers to these questions are not only important for understanding the international capital market but are also critical for analyzing a wide range of issues including the nation's optimal rate of saving and the incidence of tax changes. (This abstract was borrowed from another version of this item.)
2,210 citations
TL;DR: In this paper, the authors construct estimates of external assets and liabilities for 145 countries for 1970-2004, focusing on trends in net and gross external positions, and the composition of international portfolios.
2,030 citations