Net Foreign Assets Management and Capital Account Liberalization. The Romanian Case

EU accession requires, inter alia, free movements of capital. If a massive capital outflow occurs, the central banks from the accession or acceding countries may carry two types of intervention: on money market, and introducing restrictions on capital account. The paper explains when is recommendable to initiate one or other type of intervention, quantifying the intervention costs and introducing the idea of a minim ceiling the net foreign assets may not drop beneath. The model is tested on Romania data, and results assess that a decrease into the net foreign assets up to 20% should call for central bank intervention only on money market. A higher sunk of the net foreign assets will require restrictions on capital movements.