From Financial Integration to Sudden Stops? New Evidence from EU Transition Countries

Journal Title: Finance a uver - Year 2015, Vol 65, Issue 4

Abstract

This paper examines the temporal dynamics of the relationship between real and financial determinants of capital inflows and attempts to explain the background of the recent great sudden stop episode in EU transition countries. Using historical decomposition in a structural vector autoregression framework, we find that the major pre-crisis surge in capital inflows to EU transition countries coincides with a strong increase in correlation between the financial component and observed capital inflows. The consequences of these trends have been reflected in the high volatility of capital inflows and their retrenchment during the financial crisis. Analysis further shows that almost all sudden stop episodes in EU transition countries have been characterized by sudden increases in the volatility of financial components of capital inflows. Results are robust to various model specifications and different subcategories of capital inflows.

Authors and Affiliations

Tomislav Globan

Keywords

Related Articles

International Dependence and Contagion across Asset Classes: The Case of Poland

We investigate the linkages between international financial markets and Poland, including stocks, bonds and foreign exchange. We work in a static copula framework, allow for asymmetry of tail behavior and use tail depend...

Does Stock Liquidity Explain the Premium for Stock Price Momentum?

The empirically documented positive relationship between price momentum and subsequent stock returns constitutes a puzzle that evades a compelling theoretical explanation. This study analyzes one of the proposed explanat...

top Mutual Funds: Does the Performance Erosion Effect Exist? Evidence from the Czech Republic, Hungary and Poland

The main aim of this paper is to examine whether the performance of mutual funds in the 2000-2015 period in the Czech Republic, Hungary and Poland was related to net asset value under management. The study is also to ver...

The Nexus Between Systemic Risk and Sovereign Crises

This paper focuses on the relationship between the financial system and sovereign debt crises by analyzing sovereign support to banks and banks’ resulting exposure to the bonds issued by weak sovereigns. We construct an...

What Determines the Current Account: Intratemporal versus Intertemporal Factors

This paper adds to the discussion on the determinants of the current account balance. In particular, we construct a large balanced panel of data for 101 countries and 15 years covering observations for the current accoun...

Download PDF file
  • EP ID EP297525
  • DOI -
  • Views 182
  • Downloads 0

How To Cite

Tomislav Globan (2015). From Financial Integration to Sudden Stops? New Evidence from EU Transition Countries. Finance a uver, 65(4), 336-358. https://europub.co.uk/articles/-A-297525