International Capital Mobility and Current Account Targeting in Central and Eastern European Countries

The paper examines the degree of financial integration in five central and eastern European economies on the basis of saving-investment correlations. A comparison with eleven member states of the European monetary union shows that the countries under review have already reached a higher degree of integration in quantitative terms. Since this approach is sensitive to current account targeting policies, the paper uses econometric techniques to control for these kinds of policies indicating that the central and eastern European countries that suffered from current account crises in the past might have used fiscal policies to balance the current account. Acknowledgement: The author would like to thank Michael Schröder, Andreas Schrimpf and Thomas Pfahler for helpful comments and criticism. L 7, 1 Phone.: +49 621 1235 148 P.O. Box 10 34 43 Fax: +49 621 1235 223 68034 Mannheim E-mail: [email protected] Germany