Net International Investment Position as Early Warning Indicator: Does It Differ for European Union CEECs and non-CEECs?

Krzysztof Biegun , Jacek Karwowski

Abstract

The Macroeconomic Imbalance Procedure (MIP) applied by the European Commission aims to identify, prevent and address the emergence of potentially harmful macroeconomic imbalances that could adversely affect economic stability in the EU. Fourteen scoreboard MIP indicators have been defined. In our previous papers we were able to show that 1) net international investment position (NIIP) is one of the few MIP variables able to predict economic and financial crises and 2) only two of five NIIP components possess systematic predictive capacity of crises: derivatives and other investment. The aim of the paper is to check whether the NIIP components, which have the most predictive strength of crises, differ between two groups of EU countries: Central and Eastern European Countries (CEECs) and non-CEECs. All components of NIIP (direct investment, portfolio investment, financial derivatives, other investments, reserve assets) at the end of the year will be applied as regressors. Our model is an ordered probit model. We show that different components of NIIP are able to predict crises in Central and Eastern European Countries (CEECs) and non-CEECs. Only two NIIP components show relatively systematic predictive capacity of crises in CEECs: portfolio investments and other investments, while for non-CEECs there are no systematically proven variables.
Author Krzysztof Biegun (E&F / DF)
Krzysztof Biegun,,
- Department of Finance
, Jacek Karwowski (E&F / DF)
Jacek Karwowski,,
- Department of Finance
Pages2644-2653
Publication size in sheets0.5
Book Soliman Khalid S. (eds.): Education Excellence and Innovation Management: A 2025 Vision to Sustain Economic Development during Global Challenges, 2020, International Business Information Management Association (IBIMA), ISBN 9780999855141
Keywords in EnglishMacroeconomic Imbalance Procedure; European Semester, macroeconomic stability, economic crisis, ordered probit model.
Referenced project[17] Program doskonałości naukowo - badawczej INTEREKON . . Project leader at WUEB: Ewa Stańczyk-Hugiet, , start date 01-01-2019, end date 31-12-2022, in run
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Languageen angielski
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Biegun_K_Karwowski_J_Net_International_Investment.pdf 106,94 KB
Score (nominal)70
Score sourceconferenceList
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UwagaThe authors are thankful to the Ministry of Science and Higher Education in Poland for financial support to carry out this research (Grant No.: 15/RID/2018/19, INTEREKON).
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