Asset Prices and Monetary Policy (Chicago: University of Chicago Press, 2006). González-Páramo, José Manuel: “Progress towards a Framework for Financial Stability Assessment”, speech entitled “Statistics, Knowledge and Policy” and delivered at the OECD World Forum, Istanbul, 28 June 2007. Haugland, Kjersti, and Vikøren, Birger: “Financial Stability and Monetary Policy – Theory and Practice”, Norges Bank, Economic Bulletin, No. 1, 2006. Isărescu, Mugur: “Price Stability and Financial Stability” dissertation on the occasion of being awarded degree of Doctor Honoris Causa by Piteşti University, 8 December 2006. Isărescu, Mugur: “Economic Reflections”, Romanian Academy, Bucharest, 2007. Isărescu, Mugur: “Monetary Policy Issues in an Emerging Economy. The Case of Romania”, speech delivered on the occasion of being awarded the academic degree of Corresponding Member of the “Real Academia de Ciencias Económicas y Financieras” in Spain, Barcelona, 21 February 2008. Isărescu, Mugur: “International Financial Crisis and Challenges to the Monetary Policy in Romania”, dissertation on the occasion of being awarded degree of Doctor Honoris Causa by Babeş Bolyai University in Cluj-Napoca, 25 February 2009. BIS Review 5/2010  17  Isărescu, Mugur: “Nine Lessons from the Current Financial Crisis”, speech delivered during the session titled “What Lessons Can Be Learned from the Current Economic Crisis?”, organised by the Economics, Legal and Sociology Department within the Romanian Academy, in co-operation with “Costin C. Kiriţescu” National Institute of Economic Research and the “ESEN Reflection Group” Romanian National Committee, Romanian Academy, Bucharest, 14 April 2009.

The favourable economic outlook associated with the accession to an economic union was another major cause for synchronous capital inflows in several countries. It is the case of countries joining the European Union or NAFTA. Foreign investors acted on the assumption that the accession to a union is an anchor limiting exchange rate fluctuations, cutting capital costs by lowering risk spreads and maintaining share prices at satisfactory levels. MilesiFerretti and Lane (2006) provided a breakdown of sources of massive capital inflows in Central and Eastern European (CEE) countries. The euro area countries provided 73-95 percent of total foreign direct investment in CEE countries. In 2004, in most CEE countries, more than 50 percent of total portfolio investment on the stock exchange came from the euro area, which was also the main source of foreign assets in the banking systems of CEE countries as well as of debt-creating long-term investment. The rise in prices of goods such as crude oil, copper, diamonds, a. o. (“hard” commodities) fostered capital inflows in countries exporting the aforementioned goods. Where capital inflows in countries exporting such commodities are due to low or negative real interest rates in the countries of origin of capital, then the prices for such goods come under the impact of the interest rate channel (Frankel, 2006). Nevertheless, the empirical assessments of Reinhart and Reinhart (2008) covering the 1967–2006 period do not clearly confirm the reverse correlation between real interest rates and the prices for the above-mentioned commodities. Large capital inflows had similar effects in emerging economies.