The analysis of capital flows and economic interactions in Eurasian Economic Union[Анализ Взаимодействия Потоков Капитала И Макроэкономических Показателей Стран-Членов Еаэс]

In this paper we study capital mobility in Eurasian Economic Union and its effects on the synchronization of business cycles of EAEU countries. The relevance of the study arises from two points: first, both common financial markets and business cycle synchronization are two of the focal aspects of successful economic integration; second, according to the literature financial integration may affect economic activity of the united countries ambiguously. The purpose of this paper is to estimate whether financial mobility encourages the synchronization of business cycles of EAEU countries or not. For empirical models we use data on EAEU key macroeconomic indicators and BoP indicators from 2009 to 2021, the basic methods are regression analysis on time series and panel data, principal components analysis, simultaneous equations analysis. Our results show low degree of integration of EAEU countries into international financial markets and some reduction of capital mobility in EAEU in recent decade. We’ve also showed that the intensity of foreign direct investment facilitates business cycle synchronization, but other financial flows do not have robust impact om it. We conclude that creation of Eurasian economic union has not yet promoted financial markets integration or growth of mutual investments. This might be the case due to the reduction of capital mobility in Russia. We suppose that besides the harmonization of legislation on financial markets the first stages of financial integration might also require to create special infrastructure and additional programs facilitating mutual investment.