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Prospects of Romania’s international investment position and financial stability risks

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  • Georgescu, George

Abstract

The paper aims to investigate the changes in Romania’s net international investment position (NIIP) and to evaluate the prospects of this position, having in view the country's road towards joining the Eurozone. Among the 11 key indicators of nominal and real convergence monitored by the European Commission (MIP Scoreboard) under the macroeconomic imbalances procedure, NIIP is the only one to which Romania stands above the indicative threshold (-57% of GDP in 2014 compared to the threshold of -35%). The study highlights the main driving factors that have led to the deterioration of NIIP during the last decade in Romania and the related risks to the financial stability. The comparative analysis of Romania’s NIIP with other EU Member Countries is shaping a picture of external assets and liabilities at the European level that may represent valuable benchmark points for their possible developments. The study found that, considering the strengthening of recent trends, which witnessed a decrease in external indebtedness and in the current account deficits, the net international investment position of Romania may return within the MIP prudential standard. Under the circumstances of a favorable internal and international environment and significant progresses in structural reforms, Romania could make significant steps in order to meet all the required convergence indicators and criteria for Eurozone accession during the next decade.

Suggested Citation

  • Georgescu, George, 2016. "Prospects of Romania’s international investment position and financial stability risks," MPRA Paper 69501, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:69501
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    File URL: https://mpra.ub.uni-muenchen.de/69501/1/MPRA_paper_69501.PDF
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    References listed on IDEAS

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    1. Rodrik, Dani, 2011. "The Future of Convergence," Scholarly Articles 5131504, Harvard Kennedy School of Government.
    2. Carlos A. Carrasco & Patricia Peinado, 2015. "On the Origin of European Imbalances in the Context of European Integration," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 62(2), pages 177-191.
    3. Dani Rodrik, 2011. "The future of economic convergence," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, pages 13-52.
    4. Horioka, Charles Yuji & Terada-Hagiwara, Akiko & Nomoto, Takaaki, 2015. "Explaining Foreign Holdings of Asia's Debt Securities: The Feldstein-Horioka Paradox Revisited," AGI Working Paper Series 2015-16, Asian Growth Research Institute.
    5. Zaman, Gheorghe & Georgescu, George, 2014. "Romania’s external debt threats," Working Papers of Institute for Economic Forecasting 141215, Institute for Economic Forecasting.
    6. Petr Duczynski, 2012. "On Net External Assets in Developed and Transition Countries," Prague Economic Papers, University of Economics, Prague, vol. 2012(3), pages 636-376.
    7. Georgescu, George, 2013. "Public debt, sovereign risk and sustainable development of Romania," MPRA Paper 57256, University Library of Munich, Germany.
    8. Petr Duczynski, 2012. "On Net External Assets in Developed and Transition Countries," Prague Economic Papers, Prague University of Economics and Business, vol. 2012(3), pages 363-376.
    9. IANCU, Aurel, 2013. "Extending Financialisation and Increasing Fragility of the Financial System," Working Papers of National Institute for Economic Research 130307, Institutul National de Cercetari Economice (INCE).
    10. Zsolt Darvas, 2012. "Intra-euro rebalancing is inevitable but insufficient," Bruegel Policy Contributions 747, Bruegel.
    11. Gheorghe Zaman & George Georgescu, 2010. "Romania’s External Debt Sustainability Under Crisis Circumstances," Romanian Journal of Economics, Institute of National Economy, vol. 30(1(39)), pages 5-38, June.
    12. Angélique Herzberg, 2015. "Sustainability of External Imbalances," Springer Books, Springer, edition 127, number 978-3-658-07091-5, March.
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    Cited by:

    1. Zaman, Gheorghe & Georgescu, George, 2018. "Evoluția capitalului în România în secolul 1918-2018 de la Marea Unire la tranziția la economia de piață [Romania’s capital developments during 1918-2018 century from the Great Union to the market ," MPRA Paper 92316, University Library of Munich, Germany.
    2. Georgescu, George, 2016. "The Gross Domestic Product. History, relevance and limitations in its interpretation," MPRA Paper 73644, University Library of Munich, Germany.
    3. MILEA, Camelia, 2017. "A Look At The Evolution And Characteristics Of The Romanian Foreign Debt Over The Past Years," Studii Financiare (Financial Studies), Centre of Financial and Monetary Research "Victor Slavescu", vol. 21(4), pages 65-81.

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    More about this item

    Keywords

    net international investment position; nominal and real convergence; financial stability; MIP Scoreboard; Eurozone accession;
    All these keywords.

    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
    • F45 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Macroeconomic Issues of Monetary Unions
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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