Capital Flows to EU New Member States: Does Sector Destination Matter?

March 1, 2011

Preview Citation

Format: Chicago

Pritha Mitra. Capital Flows to EU New Member States: Does Sector Destination Matter?, (USA: International Monetary Fund, 2011) accessed November 22, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

The recent boom-bust episode in Emerging Europe was largely the product of surges and sudden stops in capital inflows. This paper empirically argues that the sectors into which capital flows determines their impact on GDP growth. Applying data from EU New Member States, it is found that capital flows into real estate have a greater impact on swings in GDP than other sectors, irrespective of a country's exchange rate or fiscal policy. Consequently, as new waves of capital inflows spread to emerging markets, policies may usefully focus on supporting capital inflows towards economic sectors that minimize large swings in GDP.

Subject: Capital flows, Capital inflows, Consumption, Credit, Foreign direct investment

Keywords: Bulgaria, FDI, GDP, GDP growth, WP

Publication Details

Pages:

27
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2011/067
Stock No:

WPIEA2011067
ISBN:

9781455228034
ISSN:

1018-5941

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