Transformations  in
Business & Economics

Capital Flows in Romania: Evolutions, Consequences and Challenges Adressing the Central Bank Policy
Diane Paula Corina Vancea, Cristina Duhnea

ABSTRACT. The fact that any dramatic increase in capital inflows (especially the short-term, volatile ones) will exert high future pressures on the capital outflows must represent a major concern for any economic policy decision-makers and understanding the factors underlying these contradictory flows represents the key to select the correct solutions for an optimal legal framework. This paper discusses Romania's experience in attracting and managing financial flows with a section dedicated to the evolution and the changes in the profile of capital flows to and from Romania and a section discussing on the factors that negatively affect Romania's financial stability determined by the capital movements and the responses of both, the central bank and the regulatory and market supervision bodies. The conclusions present aspects of the growing impact of financial integration on capital flows and the implications of financial integration on monetary policy and other types of policies regarding the financial market stability.

KEYWORDS: capital flows, foreign direct investments, central bank, portfolio investments, Romania.

JEL classification: E22, E44, E58, GOl.