Capital mobility and EU enlargement

Abstract

The membership of the Eastern European transition economies in the EU would require inter alia the full liberalization of their capital flows. Using the correlation between domestic saving and investment, this paper provides empirical evidence of the openness with respect to foreign capital that the accession states have attained so far. A comparison with the southern members of the EU shows that the countries under review have reached a similar degree of integration in quantitative terms. Yet, further adjustment in qualitative terms, i.e., in the structure of capital flows, can be expected as the process of accession proceeds.