CASE Network Studies and Analyses 411 - The Global Financial Crisis and its Impact on Emerging Market Economies in Europe and the CIS: Evidence from mid-2010
Emerging market economies were major beneficiaries of the economic boom before 2007. More recently, they have become victims of the global financial crisis. Their future development depends, to a large extent, on global economic prospects. Today the global economy and the European economy are much more integrated and interdependent than they were ten or twenty years ago. Every country must recognize its limited economic sovereignty and must be prepared to deal with the consequences of global macroeconomic fluctuations.
The statistical data for 2009 provides a mixed picture with respect to the impact of the crisison various groups of countries and individual economies. On average, Central and Eastern Europe experienced a smaller output decline than the Euro area and the entire EU while the CIS, especially its European part, contracted more dramatically. However, there was a deep differentiation within each country group. Looking globally, richer countries, which are more open to trade and in which the banking sector plays a larger role and which rely more on external financing, suffered more than less sophisticated economies, which are less dependent on trade and credit (especially from external sources). With some exceptions, the previous good growth performance helped rather than handicapped countries in the CEE and CIS regions in the crisis year of 2009.
The post-crisis recovery has been rather modest and incomplete. It remains vulnerable to new shocks (like the Greek Fiscal crisis), the danger of sovereign default and other uncertainties. Full post-crisis recovery and increasing potential growth will require far going economic and institutional reforms on both national, regional (e.g., EU) and global levels.
Authored by: Marek Dąbrowski
Published in 2010
Unlike the crisis years of 2007-2009 (when the insolvency of large banks was a major problem), the current round of the global financial crisis has fiscal origins. Almost all developed countries suffer from an excessive public debt burden that has been built up over the last two decades or more. The financial crisis caused a further deterioration of government accounts as a result of ill-tailored countercyclical fiscal response and, in some cases, a costly financial sector rescue. All excessively indebted countries must conduct fiscal adjustment, even if this involves economic and political costs in terms of lower output and higher unemployment. Central banks can reduce these costs through accommodative monetary policies but without compromising their anti-inflationary missions and institutional independence. The ECB is additionally constrained by its institutional status which is based on a delicate cross-country political consensus. Excessive ECB involvement in quasi-fiscal rescue operations can undermine this consensus and lead to a disintegration of the Eurozone. There are also strong arguments in favor of strengthening fiscal and banking integration within the EU, especially the fiscal discipline mechanism at national levels, and building the EU rescue capacity in respect to sovereigns and banks based on strong policy conditionality.
Authored by: Marek Dabrowski
Published in 2012
This paper focuses on roots of strain in the European Monetary Union (EMU). It argues that there is need for a thorough reform of the governance structure of the Union in conjunction with radical changes in the regulation and supervision of financial markets. Financial intermediation has gone astray in recent decades and entailed a big bubble in the industrialized world. Waves of financial deregulation have enhanced systemic risks, via speculative behavior and growing inter-connectedness. Moreover, the EMU was sub-optimal from its debut and competitiveness gaps did not diminish against the backdrop of its inadequate policy and institutional design. The euro zone crisis is not related to fiscal negligence only; over-borrowing by the private sector and poor lending by banks, as well as a one-sided monetary policy, also explain this debacle. The EMU needs to complement its common monetary policy with solid fiscal/budget underpinnings. Fiscal rules and sanctions are necessary, but not sufficient. A common treasury (a federal budget) is needed in order to help the EMU absorb shocks and forestall confidence crises. A joint system of regulation and supervision of financial markets should operate. Emergency measures have to be comprehensive and acknowledge the necessity of a lender of last resort; they have to combat vicious circles. Structural reforms and EMU level policies are needed to enhance competitiveness in various countries and foster convergence. The EU has to work closely with the US and other G20 members in order to achieve a less unstable global financial system.
Authored by: Daniel Daianu
Published in 2012
The Eurozone crisis mobilises an appreciable amount of the attention of politicians and the public, with calls for a decisive defence of the euro, because the single currency’s demise is said to be the beginning of the end of the EU and Single European Market. In our view, preserving the euro may result in something completely different than expected: the disintegration of the EU and the Single European Market rather than their further strengthening. The fundamental problem with the common currency is individual countries’ inability to correct their external exchange rates, which normally constitutes a fast and efficient adjustment instrument, especially in crisis times.
Europe consists of nation states that constitute the major axes of national identity and major sources of government’s legitimisation. Staying within the euro zone may sentence some countries – which, for whatever reason, have lost or may lose competitiveness – to economic, social and civilizational degradation, and with no way out of this situation. This may disturb social and political cohesion in member countries, give birth to populist tendencies that endanger the democratic order, and hamper peaceful cooperation in Europe. The situation may get out of control and trigger a chaotic break-up of the euro zone,
threatening the future of the whole EU and Single European Market.
In order to return to the origins of European integration and avoid the chaotic break-up of the euro zone, the euro zone should be dismantled in a controlled manner. If a weak country were to leave the euro zone, it would entail panic and a banking system collapse. Therefore we opt for a different scenario, in which the euro area is slowly dismantled in such a way that the most competitive countries or group of such countries leave the euro zone. Such a step would create a new European currency regime based on national currencies or currencies serving groups of homogenous countries, and save EU institutions along with the Single European Market.
This paper has been also published in "German Economic Review" (Volume 14, Issue 1, pages 31–49, February 2013)
Authored by: Stefan Kawalec and Ernest Pytlarczyk
After a long period in which state-led development was the dominant economic paradigm, since the 1980s private sector development has been the focus for economic policy makers. It is probably no coincidence that economic growth, stagnant for a few decades in much of the developing world, took off in the 1990s after this policy shift, and has generally remained high (in spite of a wave of crises and recessions in the late 1990s and early 2000s). Privatization has made a great deal of progress in the developing world, particularly in Latin America, though the Middle East and North Africa (MENA) have lagged somewhat.
Authored by: Richard Woodward, Mehdi Safavi, Piotr Kozarzewski
Published in 2012
Despite significant economic reforms in many Southern Mediterranean EU neighbour countries, their growth performance has on average been subdued. This study analyses the differences in growth performance and macroeconomic stability across Mediterranean countries, to draw lessons for the future. The main findings are that Southern Mediterranean countries should benefit from closer ties with the EU that result in higher levels of trade and FDI inflows, once the turbulence of the ‘Arab Spring’ is resolved, and from the development of financial markets and infrastructure. They will also benefit in keeping inflation under control, which will depend in great part on their ability to maintain fiscal discipline and sustainable current accounts. One of the main challenges for the region will be to implement structural reforms that can help them absorb a large pool of unemployed without creating upward risks to inflation.
Authored by: Leonor Coutinho
Published in 2012
The financial innovations and increased integration of capital markets have made the nature of balance of payments turmoil much more complex, than described by firstgeneration models. The severe financial crises, which erupted in 1990's in many seemingly "invulnerable" economies that in most cases were characterised by a balanced budget and a modest public debt have turned away the attention of analysts and policymakers from fiscal variables towards other determinants. The fiscal factors, nonetheless, still remain among important causes of financial turbulences, especially in emerging markets, what has been manifested by the 1998/1999 crises of FSU (Former Soviet Union) economies.
The purpose of this paper is to re-examine the theoretical and empirical links between fiscal sector and the emergence of financial crises, with an emphasis on transition economies.
Authored by: Joanna Siwinska-Gorzelak
Published in 2000
This paper reports the progress of nominal and real convergence of Spain, Portugal and Greece during their accession to the Economic and Monetary Union (EMU). When the EMU was designed, it was hoped that it would induce nominal convergence (convergence of interest rates and inflation rates) and stimulate investments and economic growth through its positive microeconomic effects. As had been expected, nominal interest rates have converged quite early during the accession, output has been growing fast, and the countries experienced an inflow of foreign direct investments (FDI) and an increase of domestic investment rates. However, once within the EMU, all three countries experienced persistently higher inflation rates, which may be consistent with the convergence of price levels, instead of inflation. While all the above phenomena can be related to the EMU accession, in an econometric estimation for Spain in which we control for macroeconomic policies, we are unable to detect significant microeconomic effects of the EMU. Therefore, we conclude that it is the policies induced by the necessity to satisfy the Maastricht criteria that matter primarily for the macroeconomic performance soon after accession. In any case, the experience of the SPG is encouraging for the new member states facing accession to the EMU in the future.
Authored by: Marek Jarocinski
Published in 2003
Unlike the crisis years of 2007-2009 (when the insolvency of large banks was a major problem), the current round of the global financial crisis has fiscal origins. Almost all developed countries suffer from an excessive public debt burden that has been built up over the last two decades or more. The financial crisis caused a further deterioration of government accounts as a result of ill-tailored countercyclical fiscal response and, in some cases, a costly financial sector rescue. All excessively indebted countries must conduct fiscal adjustment, even if this involves economic and political costs in terms of lower output and higher unemployment. Central banks can reduce these costs through accommodative monetary policies but without compromising their anti-inflationary missions and institutional independence. The ECB is additionally constrained by its institutional status which is based on a delicate cross-country political consensus. Excessive ECB involvement in quasi-fiscal rescue operations can undermine this consensus and lead to a disintegration of the Eurozone. There are also strong arguments in favor of strengthening fiscal and banking integration within the EU, especially the fiscal discipline mechanism at national levels, and building the EU rescue capacity in respect to sovereigns and banks based on strong policy conditionality.
Authored by: Marek Dabrowski
Published in 2012
This paper focuses on roots of strain in the European Monetary Union (EMU). It argues that there is need for a thorough reform of the governance structure of the Union in conjunction with radical changes in the regulation and supervision of financial markets. Financial intermediation has gone astray in recent decades and entailed a big bubble in the industrialized world. Waves of financial deregulation have enhanced systemic risks, via speculative behavior and growing inter-connectedness. Moreover, the EMU was sub-optimal from its debut and competitiveness gaps did not diminish against the backdrop of its inadequate policy and institutional design. The euro zone crisis is not related to fiscal negligence only; over-borrowing by the private sector and poor lending by banks, as well as a one-sided monetary policy, also explain this debacle. The EMU needs to complement its common monetary policy with solid fiscal/budget underpinnings. Fiscal rules and sanctions are necessary, but not sufficient. A common treasury (a federal budget) is needed in order to help the EMU absorb shocks and forestall confidence crises. A joint system of regulation and supervision of financial markets should operate. Emergency measures have to be comprehensive and acknowledge the necessity of a lender of last resort; they have to combat vicious circles. Structural reforms and EMU level policies are needed to enhance competitiveness in various countries and foster convergence. The EU has to work closely with the US and other G20 members in order to achieve a less unstable global financial system.
Authored by: Daniel Daianu
Published in 2012
The Eurozone crisis mobilises an appreciable amount of the attention of politicians and the public, with calls for a decisive defence of the euro, because the single currency’s demise is said to be the beginning of the end of the EU and Single European Market. In our view, preserving the euro may result in something completely different than expected: the disintegration of the EU and the Single European Market rather than their further strengthening. The fundamental problem with the common currency is individual countries’ inability to correct their external exchange rates, which normally constitutes a fast and efficient adjustment instrument, especially in crisis times.
Europe consists of nation states that constitute the major axes of national identity and major sources of government’s legitimisation. Staying within the euro zone may sentence some countries – which, for whatever reason, have lost or may lose competitiveness – to economic, social and civilizational degradation, and with no way out of this situation. This may disturb social and political cohesion in member countries, give birth to populist tendencies that endanger the democratic order, and hamper peaceful cooperation in Europe. The situation may get out of control and trigger a chaotic break-up of the euro zone,
threatening the future of the whole EU and Single European Market.
In order to return to the origins of European integration and avoid the chaotic break-up of the euro zone, the euro zone should be dismantled in a controlled manner. If a weak country were to leave the euro zone, it would entail panic and a banking system collapse. Therefore we opt for a different scenario, in which the euro area is slowly dismantled in such a way that the most competitive countries or group of such countries leave the euro zone. Such a step would create a new European currency regime based on national currencies or currencies serving groups of homogenous countries, and save EU institutions along with the Single European Market.
This paper has been also published in "German Economic Review" (Volume 14, Issue 1, pages 31–49, February 2013)
Authored by: Stefan Kawalec and Ernest Pytlarczyk
After a long period in which state-led development was the dominant economic paradigm, since the 1980s private sector development has been the focus for economic policy makers. It is probably no coincidence that economic growth, stagnant for a few decades in much of the developing world, took off in the 1990s after this policy shift, and has generally remained high (in spite of a wave of crises and recessions in the late 1990s and early 2000s). Privatization has made a great deal of progress in the developing world, particularly in Latin America, though the Middle East and North Africa (MENA) have lagged somewhat.
Authored by: Richard Woodward, Mehdi Safavi, Piotr Kozarzewski
Published in 2012
Despite significant economic reforms in many Southern Mediterranean EU neighbour countries, their growth performance has on average been subdued. This study analyses the differences in growth performance and macroeconomic stability across Mediterranean countries, to draw lessons for the future. The main findings are that Southern Mediterranean countries should benefit from closer ties with the EU that result in higher levels of trade and FDI inflows, once the turbulence of the ‘Arab Spring’ is resolved, and from the development of financial markets and infrastructure. They will also benefit in keeping inflation under control, which will depend in great part on their ability to maintain fiscal discipline and sustainable current accounts. One of the main challenges for the region will be to implement structural reforms that can help them absorb a large pool of unemployed without creating upward risks to inflation.
Authored by: Leonor Coutinho
Published in 2012
The financial innovations and increased integration of capital markets have made the nature of balance of payments turmoil much more complex, than described by firstgeneration models. The severe financial crises, which erupted in 1990's in many seemingly "invulnerable" economies that in most cases were characterised by a balanced budget and a modest public debt have turned away the attention of analysts and policymakers from fiscal variables towards other determinants. The fiscal factors, nonetheless, still remain among important causes of financial turbulences, especially in emerging markets, what has been manifested by the 1998/1999 crises of FSU (Former Soviet Union) economies.
The purpose of this paper is to re-examine the theoretical and empirical links between fiscal sector and the emergence of financial crises, with an emphasis on transition economies.
Authored by: Joanna Siwinska-Gorzelak
Published in 2000
This paper reports the progress of nominal and real convergence of Spain, Portugal and Greece during their accession to the Economic and Monetary Union (EMU). When the EMU was designed, it was hoped that it would induce nominal convergence (convergence of interest rates and inflation rates) and stimulate investments and economic growth through its positive microeconomic effects. As had been expected, nominal interest rates have converged quite early during the accession, output has been growing fast, and the countries experienced an inflow of foreign direct investments (FDI) and an increase of domestic investment rates. However, once within the EMU, all three countries experienced persistently higher inflation rates, which may be consistent with the convergence of price levels, instead of inflation. While all the above phenomena can be related to the EMU accession, in an econometric estimation for Spain in which we control for macroeconomic policies, we are unable to detect significant microeconomic effects of the EMU. Therefore, we conclude that it is the policies induced by the necessity to satisfy the Maastricht criteria that matter primarily for the macroeconomic performance soon after accession. In any case, the experience of the SPG is encouraging for the new member states facing accession to the EMU in the future.
Authored by: Marek Jarocinski
Published in 2003
The The purpose of this paper is to analyze the various challenges facing European integration and the EU institutional architecture as result of the global financial crisis. The European integration process is not yet complete, both in terms of its content and geographical coverage. It can be viewed as a kind of intermediate hybrid between an international organization and a federation, subject to further evolution. This is also true of the Single European Market and the Economic and Monetary Union, which form the core of the EU economic architecture. Certain policy prerogatives (such as external trade, competition, and the Common Agriculture Policy) are delegated to the supranational level while others (such as financial supervision or fiscal policy) remain largely in the hands of national authorities.
Authored by: Marek Dąbrowski
Published in 2009
Twenty years of euro history confirms the euro’s stability and position as the second global currency. It also enjoys the support of majority of the euro area population and is seen as a good thing for the European Union. The European Central Bank has been successful in keeping inflation at a low level. However, the European debt and financial crisis in the 2010s created a need for deep institutional reform and this task remains unfinished.
POSITION PAPER: Euro Zone Crisis. Diagnosis and Likely Solutions (ESADEgeo)ESADE
Author: Fernando Ballabriga
ESADEgeo - February 2014
Southern euro countries are in a situation of vulnerability due to three factors: their high debt levels, their eroded competitiveness and their difficulties to restart growth. Together, these factors generate a vicious circle which is difficult to exit and which can even degenerate into a self-fulfilling economic downward spiral. This policy brief provides a short guiding tour to the euro zone crisis. It looks at the current situation, the full context conditioning the solutions to the situation, how we got here, and the possible way out. The latter section outlines a set of minimum steps required to make the euro sustainable.
The efforts to stabilize the Moldovan economy after the crisis of 1998 have been largely successful. The country avoided international default as current account position radically improved, cooperation with international financial institutions was re-established and a significant primary fiscal surplus was achieved. As a result, the exchange rate was stabilised and inflation substantially reduced. Moreover, several important structural reforms were implemented and privatisation of key-industries pursued with much more determination than previously. However, only economic growth would bring real solutions to the persistent problems of external and internal imbalances of the Moldovan economy and would allow the country to face its heavy debt burden in the future. Unfortunately, prospects for sustainable growth remain weak, as the most important issues that constrain private entrepreneurship and investments have not been effectively tackled. These issues include: lack of territorial integrity, ineffective legal system, widespread corruption and rent seeking. It is unlikely that these problems can be solved until the Moldovan parliament assumes full ownership of reform process.
Authored by: Larisa Lubarova, Oleg Petrushin, Artur Radziwill
Published in 2000
This paper draws on the experience of emerging Europe and argues that foreign capital is an enviable development opportunity with tail risks. Financial integration and foreign savings supported growth in the EU12 and EU candidate countries. We argue that this was possible because of EU membership (actual or potential) and its role as an anchor for expectations. In contrast, the eastern partnership states did not benefit from the foreign savings-growth link. But financial integration also led to a buildup of vulnerabilities and now exposes emerging Europe to prolonged uncertainty and financial deleveraging due to eurozone developments. Nonetheless, we believe that external imbalances should not be eradicated—nor should emerging Europe pursue a policy of self-insurance. Instead, what we refer to as an acyclical fiscal policy stance could serve to counterbalance private sector behavior. Going forward, a more proactive macroprudential policy will also be needed to limit financial system vulnerabilities when external imbalances are large.
This paper build on work presented in a World Bank report titled “Golden Growth: Restoring the Lustre of the European Economic Model” (2012) and on Juan Zalduendo’s presentation on “Financial integration. Lessons from CEE and SEE” delivered at the CASE 2011 International Conference on “Europe 2020: Exploring the Future of European Integration” held in Falenty near Warsaw, November 18-19, 2011.
Authored by: Aleksandra Iwulska, Naotaka Sugawara, Juan Zalduendo
Published in 2012
After stabilization in 1993 Moldova maintained an unsustainable macroeconomic policy mix. The key problem was a lack of a fiscal adjustment, which resulted in large budget deficits. At the same time, the National Bank of Moldova (NBM) attempted to conduct a tight monetary policy. As a result, the exchange rate was appreciating, domestic absorption increasingly exceeded income and the country has been running large Current Account deficits. Moldova had an access to international financial markets and its indebtedness vs. the rest of the world was growing year by year at an alarming rate. Finally, in late 1998 Moldova suffered a balance of payments crisis, directly triggered by developments in Russia. Moldovan leu was devalued by about 70% and the current account improved.
The paper concentrates on the empirical dimension of the Moldovan financial crisis. It provides a case study of a) detecting and interpreting macroeconomic anomalies and b) identification of early warning signals of policy unsustainability and imminent change of financial market sentiment.
Authored by: Marek Jarocinski
Published in 2000
Since May 1, 2004 the European Union's new member states (NMS) have been subject to the same fiscal rules established in the Treaty on the European Union and Stability and Growth Pact (SGP) as the old member states (OMS). The NMS entered the EU running structural fiscal deficits. More than half of them (including the biggest ones) breach the Treaty's actual deficit limits and are already the subject of the excessive deficit procedure. A high rate of economic growth makes the fiscal situation of most NMS reasonably manageable in the short- to medium-term, but the long term fiscal outlook, mostly connected with the consequences of an aging population, is dramatic. The NMS should therefore prepare themselves now to be able to meet this challenge over the next decades (the same goes for the OMS). In addition, the perspective of EMU entry should provide the NMS with a strong incentive to reduce their deficits now because waiting (and postponing both fiscal adjustment and the adoption of the Euro) will only result in higher cumulative fiscal costs. The additional financial burden connected with EU accession cannot serve as excuse in delaying fiscal consolidation.
In spite of the growing debate on the relevance of the EU's fiscal surveillance rules and not excluding the possibility of their limited modification, they should not be relaxed. Frequent breaching of these rules cannot serve as an argument that they are irrelevant from the point of view of safeguarding fiscal prudence and avoiding fiscal 'free riding' under the umbrella of monetary union. Any version of fiscal surveillance rules (either current or modified) must be solidly anchored in an effective enforcement mechanism (including automatic sanctions) at the EU and national levels.
Authored by: Malgorzata Antczak, Marek Dabrowski, Michal Gorzelak
Published in 2005
This paper takes a systematic look at the economic impact of the crisis that started in earnest in the fall of 2008 across countries and regions. Despite warnings of growing domestic and external imbalances in many countries years ahead of the crisis, the massive impact of the crisis came as a surprise to most. By correlating economic performance in the crisis with an extensive set of early warning, country insurance, and policy indicators, this paper provides some lessons on crisis prevention and management for the future. Although significant efforts have been made to develop robust early warnings systems, the paper shows the mixed success of some commonly analyzed indicators in predicting economic outcomes in this crisis. The only robust early warning indicator was increases in real estate prices while international reserves seem to have insured against the worst crisis outcomes on average. However, much work on building a robust early warning system remains and the analytical and empirical challenges in this area are substantial. The issues confronting early warning systems are also relevant to the more recent field of macro prudential supervision and regulation. Nevertheless, the cost of crises is massive and preventing future ones with better regulation, policies and supervision based on solid research must be a top priority among policy makers and academics alike.
The European debt crisis triggered a debate on the lacking components of the EU and EMU integration architecture. Many believe that a common currency requires closer fiscal and political integration as a condition for its survival. This opinion is not necessarily supported by the experience of other monetary unions, especially those created by sovereign states. On the other hand, the current EU integration architecture already contains several elements of fiscal union. Furthermore, in several important policy areas such as financial supervision, defense, security, border protection, foreign policy, environmental protection, and climate change, the centralization of tasks and resources at the Union level could offer increasing returns to scale and a better chance to address pan-European externalities. This applies to the entire EU, not only to the Eurozone.
Each variant of fiscal integration must be based on sound foundations of fiscal discipline. Market discipline, i.e., the danger of sovereign default, supplemented by clear and consistently enforced fiscal rules is the best solution to this problem. Unfortunately, since 2010, the ‘no bail out’ principle has been replaced by a policy of conditional bailout of governments in fiscal trouble. Some proposals, such as Eurobonds or the lender of last resort to governments, go even further in this direction, and threaten to build a dysfunctional fiscal union.
Authored by: Marek Dąbrowski
Published in 2013
Policy Research Working Paper - The Experience with Macro-Prudential Policies...M. İbrahim Turhan
M. İbrahim TURHAN - Borsa İstanbul Yönetim Kurulu Başkanı ve Genel Müdürü, BIST Başkanı, Chairman & CEO, www.ibrahimturhan.com.
Policy Research Working Paper - The Experience with Macro-Prudential Policies of the Central Bank of the Republic of Turkey in Response. M. İbrahim Turhan - October 2011
We apply Feldstein's (1997, 1999) analysis of the interactions between the tax system and inflation to two transition economies: Poland and Ukraine. We find that the taxrelated costs of inflation in these countries are significantly smaller than in mature market economies. Our analysis points out that the tax system in these two countries is superior to the tax system in developed market economies, as taxes on investment income are lower. It implies that transition countries should avoid replicating other tax systems and, instead, take advantage of the unique opportunity to design and entrench the features of their tax system which are superior to those in mature economies.
Authored by: Monika Blaszkiewicz, Jerzy Konieczny, Anna Myslinska, Przemyslaw Wozniak
Published in 2003
What is often abbreviated to GFC included three distinct crises: the 2007-8 North Atlantic financial crisis, a 2008-9 global economic crisis and public finance crises which became increasingly focussed on the eurozone in 2010-12. The relative weight of emerging market economies in the global economy, which had been increasing for several decades, grew even more rapidly in 2008-11 as the economies of the USA and Europe faltered, and other open economies recovered rapidly from the global economic crisis. This poses challenges for global economic governance, although there are constraints on Asia being a more assertive force. For the EU the greater dangers are, first, that if EU leaders see their economies as victims of a GFC then they will fail to address their economies’ own shortcomings, and, second, that preoccupation with internal crises will distract EU leaders from rising to the challenges and opportunities associated with the evolving multipolar global economy.
Authored by: Richard Pomfret
The The purpose of this paper is to analyze the various challenges facing European integration and the EU institutional architecture as result of the global financial crisis. The European integration process is not yet complete, both in terms of its content and geographical coverage. It can be viewed as a kind of intermediate hybrid between an international organization and a federation, subject to further evolution. This is also true of the Single European Market and the Economic and Monetary Union, which form the core of the EU economic architecture. Certain policy prerogatives (such as external trade, competition, and the Common Agriculture Policy) are delegated to the supranational level while others (such as financial supervision or fiscal policy) remain largely in the hands of national authorities.
Authored by: Marek Dąbrowski
Published in 2009
Twenty years of euro history confirms the euro’s stability and position as the second global currency. It also enjoys the support of majority of the euro area population and is seen as a good thing for the European Union. The European Central Bank has been successful in keeping inflation at a low level. However, the European debt and financial crisis in the 2010s created a need for deep institutional reform and this task remains unfinished.
POSITION PAPER: Euro Zone Crisis. Diagnosis and Likely Solutions (ESADEgeo)ESADE
Author: Fernando Ballabriga
ESADEgeo - February 2014
Southern euro countries are in a situation of vulnerability due to three factors: their high debt levels, their eroded competitiveness and their difficulties to restart growth. Together, these factors generate a vicious circle which is difficult to exit and which can even degenerate into a self-fulfilling economic downward spiral. This policy brief provides a short guiding tour to the euro zone crisis. It looks at the current situation, the full context conditioning the solutions to the situation, how we got here, and the possible way out. The latter section outlines a set of minimum steps required to make the euro sustainable.
The efforts to stabilize the Moldovan economy after the crisis of 1998 have been largely successful. The country avoided international default as current account position radically improved, cooperation with international financial institutions was re-established and a significant primary fiscal surplus was achieved. As a result, the exchange rate was stabilised and inflation substantially reduced. Moreover, several important structural reforms were implemented and privatisation of key-industries pursued with much more determination than previously. However, only economic growth would bring real solutions to the persistent problems of external and internal imbalances of the Moldovan economy and would allow the country to face its heavy debt burden in the future. Unfortunately, prospects for sustainable growth remain weak, as the most important issues that constrain private entrepreneurship and investments have not been effectively tackled. These issues include: lack of territorial integrity, ineffective legal system, widespread corruption and rent seeking. It is unlikely that these problems can be solved until the Moldovan parliament assumes full ownership of reform process.
Authored by: Larisa Lubarova, Oleg Petrushin, Artur Radziwill
Published in 2000
This paper draws on the experience of emerging Europe and argues that foreign capital is an enviable development opportunity with tail risks. Financial integration and foreign savings supported growth in the EU12 and EU candidate countries. We argue that this was possible because of EU membership (actual or potential) and its role as an anchor for expectations. In contrast, the eastern partnership states did not benefit from the foreign savings-growth link. But financial integration also led to a buildup of vulnerabilities and now exposes emerging Europe to prolonged uncertainty and financial deleveraging due to eurozone developments. Nonetheless, we believe that external imbalances should not be eradicated—nor should emerging Europe pursue a policy of self-insurance. Instead, what we refer to as an acyclical fiscal policy stance could serve to counterbalance private sector behavior. Going forward, a more proactive macroprudential policy will also be needed to limit financial system vulnerabilities when external imbalances are large.
This paper build on work presented in a World Bank report titled “Golden Growth: Restoring the Lustre of the European Economic Model” (2012) and on Juan Zalduendo’s presentation on “Financial integration. Lessons from CEE and SEE” delivered at the CASE 2011 International Conference on “Europe 2020: Exploring the Future of European Integration” held in Falenty near Warsaw, November 18-19, 2011.
Authored by: Aleksandra Iwulska, Naotaka Sugawara, Juan Zalduendo
Published in 2012
After stabilization in 1993 Moldova maintained an unsustainable macroeconomic policy mix. The key problem was a lack of a fiscal adjustment, which resulted in large budget deficits. At the same time, the National Bank of Moldova (NBM) attempted to conduct a tight monetary policy. As a result, the exchange rate was appreciating, domestic absorption increasingly exceeded income and the country has been running large Current Account deficits. Moldova had an access to international financial markets and its indebtedness vs. the rest of the world was growing year by year at an alarming rate. Finally, in late 1998 Moldova suffered a balance of payments crisis, directly triggered by developments in Russia. Moldovan leu was devalued by about 70% and the current account improved.
The paper concentrates on the empirical dimension of the Moldovan financial crisis. It provides a case study of a) detecting and interpreting macroeconomic anomalies and b) identification of early warning signals of policy unsustainability and imminent change of financial market sentiment.
Authored by: Marek Jarocinski
Published in 2000
Since May 1, 2004 the European Union's new member states (NMS) have been subject to the same fiscal rules established in the Treaty on the European Union and Stability and Growth Pact (SGP) as the old member states (OMS). The NMS entered the EU running structural fiscal deficits. More than half of them (including the biggest ones) breach the Treaty's actual deficit limits and are already the subject of the excessive deficit procedure. A high rate of economic growth makes the fiscal situation of most NMS reasonably manageable in the short- to medium-term, but the long term fiscal outlook, mostly connected with the consequences of an aging population, is dramatic. The NMS should therefore prepare themselves now to be able to meet this challenge over the next decades (the same goes for the OMS). In addition, the perspective of EMU entry should provide the NMS with a strong incentive to reduce their deficits now because waiting (and postponing both fiscal adjustment and the adoption of the Euro) will only result in higher cumulative fiscal costs. The additional financial burden connected with EU accession cannot serve as excuse in delaying fiscal consolidation.
In spite of the growing debate on the relevance of the EU's fiscal surveillance rules and not excluding the possibility of their limited modification, they should not be relaxed. Frequent breaching of these rules cannot serve as an argument that they are irrelevant from the point of view of safeguarding fiscal prudence and avoiding fiscal 'free riding' under the umbrella of monetary union. Any version of fiscal surveillance rules (either current or modified) must be solidly anchored in an effective enforcement mechanism (including automatic sanctions) at the EU and national levels.
Authored by: Malgorzata Antczak, Marek Dabrowski, Michal Gorzelak
Published in 2005
This paper takes a systematic look at the economic impact of the crisis that started in earnest in the fall of 2008 across countries and regions. Despite warnings of growing domestic and external imbalances in many countries years ahead of the crisis, the massive impact of the crisis came as a surprise to most. By correlating economic performance in the crisis with an extensive set of early warning, country insurance, and policy indicators, this paper provides some lessons on crisis prevention and management for the future. Although significant efforts have been made to develop robust early warnings systems, the paper shows the mixed success of some commonly analyzed indicators in predicting economic outcomes in this crisis. The only robust early warning indicator was increases in real estate prices while international reserves seem to have insured against the worst crisis outcomes on average. However, much work on building a robust early warning system remains and the analytical and empirical challenges in this area are substantial. The issues confronting early warning systems are also relevant to the more recent field of macro prudential supervision and regulation. Nevertheless, the cost of crises is massive and preventing future ones with better regulation, policies and supervision based on solid research must be a top priority among policy makers and academics alike.
The European debt crisis triggered a debate on the lacking components of the EU and EMU integration architecture. Many believe that a common currency requires closer fiscal and political integration as a condition for its survival. This opinion is not necessarily supported by the experience of other monetary unions, especially those created by sovereign states. On the other hand, the current EU integration architecture already contains several elements of fiscal union. Furthermore, in several important policy areas such as financial supervision, defense, security, border protection, foreign policy, environmental protection, and climate change, the centralization of tasks and resources at the Union level could offer increasing returns to scale and a better chance to address pan-European externalities. This applies to the entire EU, not only to the Eurozone.
Each variant of fiscal integration must be based on sound foundations of fiscal discipline. Market discipline, i.e., the danger of sovereign default, supplemented by clear and consistently enforced fiscal rules is the best solution to this problem. Unfortunately, since 2010, the ‘no bail out’ principle has been replaced by a policy of conditional bailout of governments in fiscal trouble. Some proposals, such as Eurobonds or the lender of last resort to governments, go even further in this direction, and threaten to build a dysfunctional fiscal union.
Authored by: Marek Dąbrowski
Published in 2013
Policy Research Working Paper - The Experience with Macro-Prudential Policies...M. İbrahim Turhan
M. İbrahim TURHAN - Borsa İstanbul Yönetim Kurulu Başkanı ve Genel Müdürü, BIST Başkanı, Chairman & CEO, www.ibrahimturhan.com.
Policy Research Working Paper - The Experience with Macro-Prudential Policies of the Central Bank of the Republic of Turkey in Response. M. İbrahim Turhan - October 2011
We apply Feldstein's (1997, 1999) analysis of the interactions between the tax system and inflation to two transition economies: Poland and Ukraine. We find that the taxrelated costs of inflation in these countries are significantly smaller than in mature market economies. Our analysis points out that the tax system in these two countries is superior to the tax system in developed market economies, as taxes on investment income are lower. It implies that transition countries should avoid replicating other tax systems and, instead, take advantage of the unique opportunity to design and entrench the features of their tax system which are superior to those in mature economies.
Authored by: Monika Blaszkiewicz, Jerzy Konieczny, Anna Myslinska, Przemyslaw Wozniak
Published in 2003
Similar to CASE Network Studies and Analyses 411 - The Global Financial Crisis and its Impact on Emerging Market Economies in Europe and the CIS: Evidence from mid-2010
What is often abbreviated to GFC included three distinct crises: the 2007-8 North Atlantic financial crisis, a 2008-9 global economic crisis and public finance crises which became increasingly focussed on the eurozone in 2010-12. The relative weight of emerging market economies in the global economy, which had been increasing for several decades, grew even more rapidly in 2008-11 as the economies of the USA and Europe faltered, and other open economies recovered rapidly from the global economic crisis. This poses challenges for global economic governance, although there are constraints on Asia being a more assertive force. For the EU the greater dangers are, first, that if EU leaders see their economies as victims of a GFC then they will fail to address their economies’ own shortcomings, and, second, that preoccupation with internal crises will distract EU leaders from rising to the challenges and opportunities associated with the evolving multipolar global economy.
Authored by: Richard Pomfret
Lazard Investment Research: Sunset Boulevard, An Interim Report on the Develo...LazardLazard
The introduction of the euro was implemented very quickly, culminating in 1999 when the common currency began circulation, which occurred before many outstanding questions had been resolved. The policies that composed the European Monetary Union’s (EMU) legal and economic foundation contained many cursory and often contradictory points. Consequently, the euro countries came under pressure during the financial crisis in six interdependent areas, including: liquidity, banks and the broader financial system, sovereign debt and solvency, balance of payments, competi- tiveness, and economic growth and the labor market. These problems resulted in an all-encompassing systemic crisis of confidence.
This paper uses a multi region DSGE model with collateral constrained households and residential investment to examine the effectiveness of fiscal policy stimulus measures in a credit crisis. The paper explores alternative scenarios which differ by the type of budgetary measure, its length, the degree of monetary accommodation and the level of international coordination. In particular we provide estimates for New EU Member States where we take into account two aspects. First, debt denomination in foreign currency and second, higher nominal interest rates, which makes it less likely that the Central Bank is restricted by the zero bound and will consequently not accommodate a fiscal stimulus. We also compare our results to other recent results obtained in the literature on fiscal policy which generally do not consider credit constrained households.
Authored by: Jan in't Veld, Werner Roeger, István P. Székely
Published in 2011
uDc 339.7.012professional papermIkI runtEV nEW trEn.docxmarilucorr
uDc 339.7.012
professional paper
mIkI runtEV *
nEW trEnDs anD fEaturEs of IntErnatIonal fInancIal
manaGEmEnt
abstract
The motive for writing a paper is to answer the question of whether and
how much international financial management affects positively the overall
socio-economic currency and financial relations in markets around the world
in the context of international economic relations. This paper links questions
about the relations between national economies and international financial
markets, on the one hand, and on the other hand, monitoring and analyzing
the movements of foreign exchange markets. The main research question
is what are the latest trends, challenges and characteristics of international
financial management after the turbulent conditions in the international
economy, finances and currencies. For this purpose, in general, the paper
has a section dedicated to theoretical and methodological studies. Therefore,
the role and problems in the functioning of the financial markets, currency
control, and their risks are described. In this context, the main characteristics
and peculiarities of the international economic environment, analysis of
globalization in the work and control of currency courses are revealed.
The research expects the following results: that international
management and market relations are more actively required for a more
comfortable economic environment on the development of international
financial management.
keywords: Financial Statistics, Monetary Policy, Monetary Data,
Currencies, (euro currency, euro-dollars), Financial Markets,
Economic and Financial relations.
JEL Classification: A10, F00, F02.
* PhD of economics, direction of international financial management, email: [email protected]
yahoo.com
250
Economic Development No. 3/2017 p.(249-261)
Introduction
Considering the movements of the international financial markets in
the last ten years. It became apparent that the transactions are more commonly
made in the Euro currency. Before the start of the recession, the income of
the american families were struck with inflation. The inflation was on a lower
level then the previous 10 years. America had created an amazing economical
machine, but apparently it only worked for the people on the top. As an
example, one of the greatest economies of the world, the USA left millions
unemployed. But even before the crisis, the US economy didn‘t deliver on
what it was promising. There was a rise in the GDP, but most of the people
felt as their living standards went down.
As a problem, due to the turbulences and risks, we single out the
unresponsible conduct of governments across the world. Especially with the
inequality of prices, and lack of control over currency markets. That was the
main reason that the central banks of Japan, USA and Europe, were pointing
out to the need for further lessening of the monetary policy in their countries.
Those activities would le ...
As the global financial crisis entered its most dramatic phase, in the second half of 2008, the International Monetary Fund (IMF), many governments and several distinguished scholars advocated expansionary fiscal olicy as the second most effective tool (after monetary stimulus) to fight deep recession and deflation. Now, more than a year later, the previous excitement surrounding the supposed power of fiscal stimulus largely disappeared and instead has been replaced by ising concerns over the sustainability of public finances in many countries. Unfortunately, the previous enthusiasts of the active counter‐cyclical fiscal policy have not always realized the causality between the two.
Authored by: Marek Dąbrowski
Published in 2009
Latin America has been strongly affected by the international crisis and recession since late 2008. In comparison to historical experience, how has Latin America coped with the global crisis, which has been the role of different transmission mechanisms, and how have the region's structural and policy conditions affected its sensitivity to foreign shocks? Moreover, what policies can protect the region better from world crises and shocks, and to which extent should it rely on a strategy of close trade and financial integration into a world economy punctuated by shocks and crises? This paper addresses the latter questions in three steps. First, by assessing empirically the sensitivity of growth in the region's seven major economies during 1990-2009 to large number of structural and cyclical factors, based on high-frequency panel-data estimations. Second, by using the latter results to decompose the amplitude of GDP reductions in both recessions according to the individual and combined contribution of the different growth factors. Third, to derive the main implications of the results for the choice of macroeconomic regimes and development strategies.
Authored by: Vittorio Corbo and Klaus Schmidt-Hebbel
Published in 2011
Bank Performance Analysis Report: German System vs. Benelux System through two of their most representative banks. Overview, Financial Analysis, Financial Reporting, COmparative analysis, Conslusions.
After reporting very high growth rates as well as being seen as examples of successful economic transition, the “Baltic tigers” (Lithuania, Latvia and Estonia) are now among the worst victims of the global economic crisis. All three have reported large declines in GDP, income and employment, which threaten the significant development progress made since the mid‐1990s.
Authored by: Michaela Pospisilova, Ben Slay
Published in 2009
Similar to CASE Network Studies and Analyses 411 - The Global Financial Crisis and its Impact on Emerging Market Economies in Europe and the CIS: Evidence from mid-2010 (18)
The report examines the social and economic drivers and impact of circular migration between Belarus and Poland, Slovakia, and the Czech Republic. The core question the authors sought to address was how managing circular migration could, in the long term, help to optimise labour resources in both the country of origin and the destination countries. In the pages that follow, the authors of the report present the current and forecasted labour market and demographic situation in their respective countries as well as the dynamics and characteristics of short-term labour migration flows between Belarus and Poland, Slovakia, and the Czech Republic, concentrating on the period since 2010. They also outline and discuss related policy responses and evaluate prospects for cooperation on circular migration.
Podręcznik został opracowany w celu przekazania trenerom i nauczycielom podstawowej wiedzy, która może być przydatna w prowadzeniu szkoleń promujących pracę rejestrowaną. Prezentuje on z jednej strony korzyści z pracy rejestrowanej, z drugiej – potencjalne koszty związane z pracą nierejestrowaną. W pierwszej kolejności informacje te przedstawiono w odniesieniu do pracowników najemnych (rozdział 2), podkreślając w sposób szczególny to, że negatywne konsekwencje pracy nierejestrowanej są ponoszone przez całe życie. Ze względu na specyficzną sytuację cudzoziemców pracujących w Polsce konsekwencje ponoszone przez tę grupę opisano oddzielnie (rozdział 3). Ponadto zaprezentowano skutki dotyczące pracodawców z szarej strefy z wyodrębnieniem tych, którzy zatrudniają cudzoziemców (rozdział 4). Uzupełnieniem przedstawionych informacji jest opis działań podejmowanych przez państwo w celu ograniczenia zjawiska pracy nierejestrowanej w Polsce (rozdział 5) oraz prowadzonych w Wielkiej Brytanii, czyli w kraju będącym liderem w walce z szarą strefą (rozdział 6).
European countries face a challenge related to the economic and social consequences of their societies’ aging. Specifically, pension systems must adjust to the coming changes, maintaining both financial stability, connected with equalizing inflows from premiums and spending on pensions, and simultaneously the sufficiency of benefits, protecting retirees against poverty and smoothing consumption over their lives, i.e. ensuring the ability to pay for consumption needs at each stage of life, regardless of income from labor.
One of the key instruments applied toward these goals is the retirement age. Formally it is a legally established boundary: once people have crossed it – on average – they significantly lose their ability to perform work (the so-called old-age risk). But since the 1970s, in many developed countries the retirement age has become an instrument of social and labor-market policy. Specifically, in the 1970s and ‘80s, an early retirement age was perceived as a solution allowing a reduction in the supply of labor, particularly among people with relatively low competencies who were approaching retirement age, which is called the lump of labor fallacy. It was often believed that people taking early retirement freed up jobs for the young. But a range of economic evidence shows that the number of jobs is not fixed, and those who retire don’t in fact free up jobs. On the contrary, because of higher spending by pension systems, labor costs rise, which limits the supply of jobs. In general, a good situation on the labor market supports employment of both the youngest and the oldest labor force participants. Additionally, a lower retirement age for women was maintained, which resulted to a high degree from cultural conditions and norms that are typical for traditional societies.
Until now, the banking sector has been one of the strong points of Poland’s economy. In contrast to banks in the U.S. and leading Western European economies, lenders in Poland came through the 2008 global financial crisis without a scratch, without needing state financial support. But in recent years the industry’s problems have been growing, creating a threat to economic growth and gains in living standards.
For an economy’s productivity to increase, funds can’t go to all companies evenly, and definitely shouldn’t go to those that are most lacking in funds, but to those that will use them most efficiently. This is true of total external financing, and thus funding both from the banking sector and from parabanks, the capital market and funds from public institutions. In Poland, in light of the relatively modest scale of the capital market, banks play a clearly dominant role in external financing of companies. This is why the author of this text focuses on the bank credit allocation efficiency.
The author points out that in the very near future, conditions will emerge in Poland which – as the experience of other countries shows – create a risk of reduced efficiency of credit allocation to business. Additionally, in Poland today, bank lending to companies is to a high degree being replaced by funds from state aid, which reduces the efficiency of allocation of external funds to companies (both loans and subsidies), as allocation of government subsidies is not usually based on efficiency. This decline in external financing allocation efficiency may slow, halt or even reverse the process, that has been uninterrupted for 28 years, of Poland’s convergence, i.e. the narrowing of the gap in living standards between Poland and the West.
The economic characteristics of the COVID-19 crisis differ from those of previous crises. It is a combination of demand- and supply-side constraints which led to the formation of a monetary overhang that will be unfrozen once the pandemic ends. Monetary policy must take this effect into consideration, along with other pro-inflationary factors, in the post-pandemic era. It must also think in advance about how to avoid a policy trap coming from fiscal dominance.
This paper is organized as follows: Chapter 2 deals with the economic characteristics of the COVID-19 pandemic and its impact on the effectiveness of the monetary policy response measures undertaken. In Chapter 3, we analyse the monetary policy decisions of the ECB (and other major CBs for comparison) and their effectiveness in achieving the declared policy goals in the short term. Chapter 4 is devoted to an analysis of the policy challenges which may be faced by the ECB and other major CBs once the pandemic emergency comes to its end. Chapter 5 contains a summary and the conclusions of our analysis.
Purpose: This paper tries to identify the wage gap between informal and formal workers and tests for the two-tier structure of the informal labour market in Poland.
Design/methodology/approach: I employ the propensity score matching (PSM) technique and use data from the Polish Labour Force Survey (LFS) for the period 2009–2017 to estimate the wage gap between informal and formal workers, both at the means and along the wage distribution. I use two definitions of informal employment: a) employment without a written agreement and b) employment while officially registered as unemployed at a labour office. In order to reduce the bias resulting from the non-random selection of
individuals into informal employment, I use a rich set of control variables representing several individual characteristics.
Findings: After controlling for observed heterogeneity, I find that on average informal workers earn less than formal workers, both in terms of monthly earnings and hourly wage. This result is not sensitive to the definition of informal employment used and is
stable over the analysed time period (2009–2017). However, the wage penalty to informal employment is substantially higher for individuals at the bottom of the wage distribution, which supports the hypothesis of the two-tier structure of the informal labour market in Poland.
Originality/value: The main contribution of this study is that it identifies the two-tier structure of the informal labour market in Poland: informal workers in the first quartile of the wage distribution and those above the first quartile appear to be in two partially different segments of the labour market.
The rule of law, by securing civil and economic rights, directly contributes to social prosperity and is one of our societies’ greatest achievements. In the European Union (EU), the rule of law is enshrined in the Treaties of its founding and is recognised not just as a necessary condition of a liberal democratic society, but also as an important requirement for a stable, effective, and sustainable market economy. In fact, it was the stability and equality of opportunity provided by the rule of law that enabled the post-war Wirtschaftswunder in Germany and the post-Communist resuscitation of the economy in Poland.
But the rule of law is a living concept that is constantly evolving – both in its formal, de jure dimension, embodied in legislation, and its de facto dimension, or its reception by society. In Poland, in particular, according to the EU, the rule of law has been heavily challenged by government since 2015 and has evolved amid continued pressure exerted on the institutions which execute laws. More recently, the outbreak of the COVID-19 pandemic transformed the perception of the rule of law and its boundaries throughout the EU and beyond (Marzocchi, 2020).
This Study contains Value Added Tax (VAT) Gap estimates for 2018, fast estimates using a simplified methodology for 2019, the year immediately preceding the analysis, and includes revised estimates for 2014-2017. It also includes the updated and extended results of the econometric analysis of VAT Gap determinants initiated and initially reported in the 2018 Report (Poniatowski et al., 2018). As a novelty, the econometric analysis to forecast potential impacts of the coronavirus crisis and resulting recession on the evolution of the VAT Gap in 2020 is reported.
In 2018, most European Union (EU) Member States (MS) saw a slight decrease in the pace of gross domestic product (GDP) growth, but the economic conditions for increasing tax compliance remained favourable. We estimate that the VAT total tax liability (VTTL) in 2018 increased by 3.6 percent whereas VAT revenue increased by 4.2 percent, leading to a decline in the VAT Gap in both relative and nominal terms. In relative terms, the EU-wide Gap dropped to 11 percent and EUR 140 billion. Fast estimates show that the VAT Gap will likely continue to decline in 2019.
Of the EU-28, the smallest Gaps were observed in Sweden (0.7 percent), Croatia (3.5 percent), and Finland (3.6 percent), the largest – in Romania (33.8 percent), Greece (30.1 percent), and Lithuania (25.9 percent). Overall, half of the EU-28 MS recorded a Gap above 9.2 percent. In nominal terms, the largest Gaps were recorded in Italy (EUR 35.4 billion), the United Kingdom (EUR 23.5 billion), and Germany (EUR 22 billion).
The euro is the second most important global currency after the US dollar. However, its international role has not increased since its inception in 1999. The private sector prefers using the US dollar rather than the euro because the financial market for US dollar-denominated assets is larger and deeper; network externalities and inertia also play a role. Increasing the attractiveness of the euro outside the euro area requires, among others, a proactive role for the European Central Bank and completing the Banking Union and Capital Market Union.
Forecasting during a strong shock is burdened with exceptionally high uncertainty. This gives rise to the temptation to formulate alarmist forecasts. Experiences from earlier pandemics, particularly those from the 20th century, for which we have the most data, don’t provide a basis for this. The mildest of them weakened growth by less than 1 percentage point, and the worst, the Spanish Flu, by 6 percentage points. Still, even the Spanish Flu never caused losses on the order of 20% of GDP – not even where it turned out to be a humanitarian disaster, costing the lives of 3-5% of the population. History suggests that if pandemics lead to such deep losses at all, it’s only in particular quarters and not over a whole year, as economic activity rebounds. The strength of that rebound is largely determined by economic policy. The purpose of this work is to describe possible scenarios for a rebound in Polish economic growth after the epidemic.
A separate issue, no less important, is what world will emerge from the current crisis. In the face of the 2008 financial crisis, White House Chief of Staff Rahm Emanuel said: “You never want a serious crisis to go to waste. And what I mean by that is an opportunity to do things that you think you could not do before.” Such changes can make the economy and society function better than before the crisis. Unfortunately, the opportunities created by the global financial crisis were squandered. Today’s task is more difficult; the scale of various problems has expanded even more. Without deep structural and institutional changes, the world will be facing enduring social and economic problems, accompanied by long-term stagnation.
"Many brilliant prophecies have appeared for the future of the EU and our entire planet. I believe that Europe, in its own style, will draw pragmatic conclusions from the crisis, not revolutionary ones; conclusions that will allow us to continue enjoying a Europe without borders. Brussels will demonstrate its usefulness; it will react ably and flexibly. First of all, contrary to the deceitful statements of members of the Polish government, the EU warned of the threats already in 2021. Secondly, already in mid-March EU assistance programs were ready, i.e. earlier than the PiS government’s “shield” program. The conclusion from the crisis will be a strengthening of all the preventive mechanisms that allow us to recognize threats and react in time of need. Research programs will be more strongly directed toward diagnosing and treating infectious diseases. Europe will gain greater self-sufficiency in the area of medical equipment and drugs, and the EU – greater competencies in the area of the health service, thus far entrusted to the member states. The 2021-27 budget must be reconstructed, to supplement the priority of the Green Deal with economic stimulus programs. In this way structural funds, which have the greatest multiplier effect for investment and the labor market, may return to favor. So once again: an addition, as a conclusion from the crisis, and not a reinvention of the EU," writes Dr. Janusz Lewandowski the author of the 162nd mBank-CASE seminar Proceeding.
Dla wielu rodaków europejskość Polski jest oczywista, trudno jest im nawet wyobrazić sobie, jak kształtowałyby się losy naszego kraju bez uczestnictwa w integracji europejskiej. Szczególnie młode pokolenie traktuje osiągnięty przez nas dzięki uczestnictwie w Unii ogromny postęp cywilizacyjny jako coś danego i naturalnego. Jednak świadomość tego, jaki był nasz punkt wyjścia, jaką przeszliśmy drogę i jak przyczyniły się do tego unijne działania oraz jakie wynikały z tego korzyści powinna nam stale towarzyszyć. Bez tej świadomości, starannego weryfikowania faktów i docenienia naszych osiągnięć grozi nam uleganie niesprawdzonym argumentom przeciwników integracji europejskiej i popełnienie nieodwracalnych błędów. Dla tych, którzy chcą poznać te fakty, przygotowany został raport "Nasza Europa. 15 lat Polski w Unii Europejskiej". Podjęto w nim ocenę 15 lat członkostwa Polski z perspektywy doświadczeń procesu integracji, z jego barierami i sukcesami, a także wyzwaniami przyszłości.
Raport jest wynikiem pracy zbiorowej licznych ekspertów z różnych dziedzin, od wielu lat analizujących wielowymiarowe efekty działania instytucji UE oraz współpracy z krajami członkowskimi na podstawie europejskich wartości i mechanizmów. Autorzy podsumowują korzyści członkostwa Polski w Unii Europejskiej na podstawie faktów, nie stroniąc jednakże od własnych ocen i refleksji.
This report is the result of the joint work of a number of experts from various fields who have been - for many years – analysing the multidimensional effects of EU institutions and cooperation with Member States pursuant to European values and mechanisms. The authors summarise the benefits of Poland’s membership in the EU based on facts; however, they do not hide their own views and reflections. They also demonstrate the barriers and challenges to further European integration.
This report was prepared by CASE, one of the oldest independent think tanks in Central and Eastern Europe, utilising its nearly 30 years of experience in providing objective analyses and recommendations with respect to socioeconomic topics. It is both an expression of concern about Poland’s future in the EU, as well as the authors’ contribution to the debate on further European integration.
Poland’s new Employee Capital Plans (PPK) scheme, which is mandatory for employers, started to be implemented in July 2019. The article looks at the systemic solutions applied in the programme from the perspective of the concept of the simultaneous reconstruction of the retirement pension system. The aim is to present arguments for and against the project from the point of view of various actors, and to assess the chances of success for the new system. The article offers a detailed study of legal solutions, an analysis of the literature on the subject, and reports of institutions that supervise pension funds. The results of this analysis point to the lack of cohesion between certain solutions of the 1999 pension reform and expose a lack of consistency in how the reform was carried out, which led to the eventual removal of the capital part of the pension system. The study shows that additional saving for old age is advisable in the country’s current demographic situation and necessary for both economic and social reasons. However, the systemic solutions offered by the government appear to be chiefly designated to serve short-term state interests and do not create sufficient incentives for pension plan participants to join the programme.
Belarus was among the few post-communist countries to resign from comprehensive market reforms and attempt to improve the efficiency of the economy through administrative means, leaving market mechanisms only an auxiliary role. Since its inception, the ‘Belarusian economic model’ has undergone several revisions of a de-statisation and de-regulation kind, but still the Belarusian economy remains dominated by the state. This paper analyses the characteristic features of the Belarusian economic system – especially those related to the public sector – as well as its evolution over time during the period following its independence. The paper concludes that during the post-Soviet period, the Belarusian economy evolved from a quasi-Soviet system based on state property, state planning, support to inefficient enterprises and the massive redistribution of funds to a more flexible hybrid model where the public sector still remains the core of the economy. The case of Belarus shows that presently there is no appropriate theoretical perspective which, in an unmodified form, could be applied to study this type of economic system. Therefore, a new perspective based on an already existing but updated approach or a multidisciplinary approach that incorporates the duality of the Belarusian economy is required.
Belarusian economy has been stagnating in 2011-2015 after 15 years of a high annual average growth rate. In 2015, after four years of stagnation, the Belarusian economy slid into a recession, its first since 1996, and experienced both cyclical and structural recessions. Since 2015, the Belarusian government and the National Bank of Belarus have been giving economic reforms a good chance thanks to gradual but consistent actions aimed at maintaining macroeconomic stability and economic liberalization. It seems that the economic authorities have sustained more transformation efforts during 2015-2018 than in the previous 24 years since 1991.
As the relative welfare level in Belarus is currently 64% compared to the Central and Eastern Europe (CEE) countries average, Belarus needs to build stronger fundaments of sustainable growth by continuing and accelerating the implementation of institutional transformation, primarily by fostering elimination of existing administrative mechanisms of inefficient resource allocation. Based on the experience of the CEE countries’ economic transformation, we highlight five lessons for the purpose of the economic reforms that Belarus still faces today: keeping macroeconomic stability, restructuring and improving the governance of state-owned enterprises, developing the financial market, increasing taxation efficiency, and deepening fiscal decentralization.
Inflation in advanced economies is low by historical standards but there is no threat of deflation. Slower economic growth is caused by supply-side constraints rather than low inflation. Below-the-target inflation does not damage the reputation of central banks. Thus, central banks should not try to bring inflation back to the targeted level of 2%. Rather, they should revise the inflation target downwards and publicly explain the rationale for such a move. Risks to the independence of central banks come from their additional mandates (beyond price stability) and populist politics.
Estonia has Europe’s most transparent tax system (while Poland is second-to-last, in 35th place), and is also known for its pioneering approach to taxation of legal persons’ income. Since 2000, payers of Estonian corporate tax don’t pay tax on their profits as long as they don’t realize them. In principle, this approach should make access to capital easier, spark investment by companies and contribute to faster economic growth. Are these and other positive effects really noticeable in Estonia? Have other countries followed in this country’s footsteps? Would deferment of income tax be possible and beneficial for Poland? How would this affect revenue from tax on corporate profits? Would investors come to see Poland as a tax haven? Does the Estonian system limit tax avoidance and evasion, or actually the opposite? Is such a system fair? Are intermediate solutions possible, which would combine the strengths or limit the weaknesses of the classical and Estonian models of profit tax? These questions are discussed in the mBank-CASE seminar Proceeding no. 163, written by Dmitri Jegorov, deputy general secretary of the Estonian Finance Ministry, who directs the country’s tax and customs policy, Dr. Anna Leszczyłowska of the Poznań University of Economics and Business and Aleksander Łożykowski of the Warsaw School of Economics.
The trade war between the U.S. and China began in March 2018. The American side raised import duties on aluminum and steel from China, which were later extended to other countries, including Canada, Mexico and the EU member states. This drew a negative reaction from those countries and bilateral negotiations with the U.S. In June 2018 America, referring to Section 301 of its 1974 Trade Act, raised tariffs to 25% on 818 groups of products imported from China, arguing that the tariff increase was a response to years of theft of American intellectual property and dishonest trade practices, which has caused the U.S. trade deficit.
Will this trade war mean the collapse of the multilateral trading system and a transition to bilateral relationships? What are the possibilities for increasing tariffs in light of World Trade Organization rules? Can the conflict be resolved using the WTO dispute-resolution mechanism? What are the consequences of the trade war for American consumers and producers, and for suppliers from other countries? How high will tariffs climb as a result of a global trade war? How far can trade volumes and GDP fall if the worst-case scenario comes to pass? Professor Jan J. Michałek and Dr. Przemysław Woźniak give answers to these questions in the mBank-CASE Seminar Proceeding No. 161.
This Report has been prepared for the European Commission, DG TAXUD under contract TAXUD/2017/DE/329, “Study and Reports on the VAT Gap in the EU-28 Member States” and serves as a follow-up to the six reports published between 2013 and 2018.
This Study contains new estimates of the Value Added Tax (VAT) Gap for 2017, as well as updated estimates for 2013-2016. As a novelty in this series of reports, so called “fast VAT Gap estimates” are also presented the year immediately preceding the analysis, namely for 2018. In addition, the study reports the results of the econometric analysis of VAT Gap determinants initiated and initially reported in the 2018 Report (Poniatowski et al., 2018). It also scrutinises the Policy Gap in 2017 as well as the contribution that reduced rates and exemptions made to the theoretical VAT revenue losses.
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Currently pi network is not tradable on binance or any other exchange because we are still in the enclosed mainnet.
Right now the only way to sell pi coins is by trading with a verified merchant.
What is a pi merchant?
A pi merchant is someone verified by pi network team and allowed to barter pi coins for goods and services.
Since pi network is not doing any pre-sale The only way exchanges like binance/huobi or crypto whales can get pi is by buying from miners. And a merchant stands in between the exchanges and the miners.
I will leave the telegram contact of my personal pi merchant. I and my friends has traded more than 6000pi coins successfully
Tele-gram
@Pi_vendor_247
how to sell pi coins effectively (from 50 - 100k pi)DOT TECH
Anywhere in the world, including Africa, America, and Europe, you can sell Pi Network Coins online and receive cash through online payment options.
Pi has not yet been launched on any exchange because we are currently using the confined Mainnet. The planned launch date for Pi is June 28, 2026.
Reselling to investors who want to hold until the mainnet launch in 2026 is currently the sole way to sell.
Consequently, right now. All you need to do is select the right pi network provider.
Who is a pi merchant?
An individual who buys coins from miners on the pi network and resells them to investors hoping to hang onto them until the mainnet is launched is known as a pi merchant.
debuts.
I'll provide you the Telegram username
@Pi_vendor_247
Even tho Pi network is not listed on any exchange yet.
Buying/Selling or investing in pi network coins is highly possible through the help of vendors. You can buy from vendors[ buy directly from the pi network miners and resell it]. I will leave the telegram contact of my personal vendor.
@Pi_vendor_247
Falcon stands out as a top-tier P2P Invoice Discounting platform in India, bridging esteemed blue-chip companies and eager investors. Our goal is to transform the investment landscape in India by establishing a comprehensive destination for borrowers and investors with diverse profiles and needs, all while minimizing risk. What sets Falcon apart is the elimination of intermediaries such as commercial banks and depository institutions, allowing investors to enjoy higher yields.
what is the future of Pi Network currency.DOT TECH
The future of the Pi cryptocurrency is uncertain, and its success will depend on several factors. Pi is a relatively new cryptocurrency that aims to be user-friendly and accessible to a wide audience. Here are a few key considerations for its future:
Message: @Pi_vendor_247 on telegram if u want to sell PI COINS.
1. Mainnet Launch: As of my last knowledge update in January 2022, Pi was still in the testnet phase. Its success will depend on a successful transition to a mainnet, where actual transactions can take place.
2. User Adoption: Pi's success will be closely tied to user adoption. The more users who join the network and actively participate, the stronger the ecosystem can become.
3. Utility and Use Cases: For a cryptocurrency to thrive, it must offer utility and practical use cases. The Pi team has talked about various applications, including peer-to-peer transactions, smart contracts, and more. The development and implementation of these features will be essential.
4. Regulatory Environment: The regulatory environment for cryptocurrencies is evolving globally. How Pi navigates and complies with regulations in various jurisdictions will significantly impact its future.
5. Technology Development: The Pi network must continue to develop and improve its technology, security, and scalability to compete with established cryptocurrencies.
6. Community Engagement: The Pi community plays a critical role in its future. Engaged users can help build trust and grow the network.
7. Monetization and Sustainability: The Pi team's monetization strategy, such as fees, partnerships, or other revenue sources, will affect its long-term sustainability.
It's essential to approach Pi or any new cryptocurrency with caution and conduct due diligence. Cryptocurrency investments involve risks, and potential rewards can be uncertain. The success and future of Pi will depend on the collective efforts of its team, community, and the broader cryptocurrency market dynamics. It's advisable to stay updated on Pi's development and follow any updates from the official Pi Network website or announcements from the team.
how to sell pi coins on Bitmart crypto exchangeDOT TECH
Yes. Pi network coins can be exchanged but not on bitmart exchange. Because pi network is still in the enclosed mainnet. The only way pioneers are able to trade pi coins is by reselling the pi coins to pi verified merchants.
A verified merchant is someone who buys pi network coins and resell it to exchanges looking forward to hold till mainnet launch.
I will leave the telegram contact of my personal pi merchant to trade with.
@Pi_vendor_247
how to swap pi coins to foreign currency withdrawable.DOT TECH
As of my last update, Pi is still in the testing phase and is not tradable on any exchanges.
However, Pi Network has announced plans to launch its Testnet and Mainnet in the future, which may include listing Pi on exchanges.
The current method for selling pi coins involves exchanging them with a pi vendor who purchases pi coins for investment reasons.
If you want to sell your pi coins, reach out to a pi vendor and sell them to anyone looking to sell pi coins from any country around the globe.
Below is the contact information for my personal pi vendor.
Telegram: @Pi_vendor_247
The European Unemployment Puzzle: implications from population agingGRAPE
We study the link between the evolving age structure of the working population and unemployment. We build a large new Keynesian OLG model with a realistic age structure, labor market frictions, sticky prices, and aggregate shocks. Once calibrated to the European economy, we quantify the extent to which demographic changes over the last three decades have contributed to the decline of the unemployment rate. Our findings yield important implications for the future evolution of unemployment given the anticipated further aging of the working population in Europe. We also quantify the implications for optimal monetary policy: lowering inflation volatility becomes less costly in terms of GDP and unemployment volatility, which hints that optimal monetary policy may be more hawkish in an aging society. Finally, our results also propose a partial reversal of the European-US unemployment puzzle due to the fact that the share of young workers is expected to remain robust in the US.
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how can I sell my pi coins for cash in a pi APPDOT TECH
You can't sell your pi coins in the pi network app. because it is not listed yet on any exchange.
The only way you can sell is by trading your pi coins with an investor (a person looking forward to hold massive amounts of pi coins before mainnet launch) .
You don't need to meet the investor directly all the trades are done with a pi vendor/merchant (a person that buys the pi coins from miners and resell it to investors)
I Will leave The telegram contact of my personal pi vendor, if you are finding a legitimate one.
@Pi_vendor_247
#pi network
#pi coins
#money
Introduction to Indian Financial System ()Avanish Goel
The financial system of a country is an important tool for economic development of the country, as it helps in creation of wealth by linking savings with investments.
It facilitates the flow of funds form the households (savers) to business firms (investors) to aid in wealth creation and development of both the parties
how can I sell pi coins after successfully completing KYCDOT TECH
Pi coins is not launched yet in any exchange 💱 this means it's not swappable, the current pi displaying on coin market cap is the iou version of pi. And you can learn all about that on my previous post.
RIGHT NOW THE ONLY WAY you can sell pi coins is through verified pi merchants. A pi merchant is someone who buys pi coins and resell them to exchanges and crypto whales. Looking forward to hold massive quantities of pi coins before the mainnet launch.
This is because pi network is not doing any pre-sale or ico offerings, the only way to get my coins is from buying from miners. So a merchant facilitates the transactions between the miners and these exchanges holding pi.
I and my friends has sold more than 6000 pi coins successfully with this method. I will be happy to share the contact of my personal pi merchant. The one i trade with, if you have your own merchant you can trade with them. For those who are new.
Message: @Pi_vendor_247 on telegram.
I wouldn't advise you selling all percentage of the pi coins. Leave at least a before so its a win win during open mainnet. Have a nice day pioneers ♥️
#kyc #mainnet #picoins #pi #sellpi #piwallet
#pinetwork
Falcon stands out as a top-tier P2P Invoice Discounting platform in India, bridging esteemed blue-chip companies and eager investors. Our goal is to transform the investment landscape in India by establishing a comprehensive destination for borrowers and investors with diverse profiles and needs, all while minimizing risk. What sets Falcon apart is the elimination of intermediaries such as commercial banks and depository institutions, allowing investors to enjoy higher yields.
how can i use my minded pi coins I need some funds.DOT TECH
If you are interested in selling your pi coins, i have a verified pi merchant, who buys pi coins and resell them to exchanges looking forward to hold till mainnet launch.
Because the core team has announced that pi network will not be doing any pre-sale. The only way exchanges like huobi, bitmart and hotbit can get pi is by buying from miners.
Now a merchant stands in between these exchanges and the miners. As a link to make transactions smooth. Because right now in the enclosed mainnet you can't sell pi coins your self. You need the help of a merchant,
i will leave the telegram contact of my personal pi merchant below. 👇 I and my friends has traded more than 3000pi coins with him successfully.
@Pi_vendor_247
If you are looking for a pi coin investor. Then look no further because I have the right one he is a pi vendor (he buy and resell to whales in China). I met him on a crypto conference and ever since I and my friends have sold more than 10k pi coins to him And he bought all and still want more. I will drop his telegram handle below just send him a message.
@Pi_vendor_247
US Economic Outlook - Being Decided - M Capital Group August 2021.pdfpchutichetpong
The U.S. economy is continuing its impressive recovery from the COVID-19 pandemic and not slowing down despite re-occurring bumps. The U.S. savings rate reached its highest ever recorded level at 34% in April 2020 and Americans seem ready to spend. The sectors that had been hurt the most by the pandemic specifically reduced consumer spending, like retail, leisure, hospitality, and travel, are now experiencing massive growth in revenue and job openings.
Could this growth lead to a “Roaring Twenties”? As quickly as the U.S. economy contracted, experiencing a 9.1% drop in economic output relative to the business cycle in Q2 2020, the largest in recorded history, it has rebounded beyond expectations. This surprising growth seems to be fueled by the U.S. government’s aggressive fiscal and monetary policies, and an increase in consumer spending as mobility restrictions are lifted. Unemployment rates between June 2020 and June 2021 decreased by 5.2%, while the demand for labor is increasing, coupled with increasing wages to incentivize Americans to rejoin the labor force. Schools and businesses are expected to fully reopen soon. In parallel, vaccination rates across the country and the world continue to rise, with full vaccination rates of 50% and 14.8% respectively.
However, it is not completely smooth sailing from here. According to M Capital Group, the main risks that threaten the continued growth of the U.S. economy are inflation, unsettled trade relations, and another wave of Covid-19 mutations that could shut down the world again. Have we learned from the past year of COVID-19 and adapted our economy accordingly?
“In order for the U.S. economy to continue growing, whether there is another wave or not, the U.S. needs to focus on diversifying supply chains, supporting business investment, and maintaining consumer spending,” says Grace Feeley, a research analyst at M Capital Group.
While the economic indicators are positive, the risks are coming closer to manifesting and threatening such growth. The new variants spreading throughout the world, Delta, Lambda, and Gamma, are vaccine-resistant and muddy the predictions made about the economy and health of the country. These variants bring back the feeling of uncertainty that has wreaked havoc not only on the stock market but the mindset of people around the world. MCG provides unique insight on how to mitigate these risks to possibly ensure a bright economic future.
CASE Network Studies and Analyses 411 - The Global Financial Crisis and its Impact on Emerging Market Economies in Europe and the CIS: Evidence from mid-2010
3. CASE Network Studies & Analyses No. 411 – The Global Financial Crisis and it’s Impact on …
2
Contents
Abstract ..................................................................................................................... 3
1. Introduction........................................................................................................... 5
2. The golden period of global growth before 2008............................................... 7
3. The first shock: global financial crisis (2008) .................................................... 8
4. Economic performance in 2009 – a mixed picture ............................................ 9
5. The second shock: European and global public debt crisis .......................... 13
6. The role of the EU/EMU umbrella ...................................................................... 14
7. Looking ahead: what can happen next?........................................................... 17
8. Conclusions and recommendations................................................................. 18
References .............................................................................................................. 21
Tables and Figures................................................................................................. 23
4. CASE Network Studies & Analyses No. 411 – The Global Financial Crisis and it’s Impact on …
Marek Dabrowski, Professor of Economics, President of CASE - Center for Social and
Economic Research, former Chairman of the Supervisory Board of CASE-Ukraine in Kyiv,
Member of the Scientific Council of the E.T. Gaidar Institute for Economic Policy in Moscow;
Former First Deputy Minister of Finance (1989-1990), Member of Parliament (1991-1993)
and Member of the Monetary Policy Council of the National Bank of Poland (1998-2004);
Since the end of 1980s he has been involved in policy advising and policy research in
Azerbaijan, Belarus, Bulgaria, Egypt, Georgia, Iraq, Kazakhstan, Kyrgyzstan, Macedonia,
Moldova, Mongolia, Poland, Romania, Russia, Serbia, Syria, Turkmenistan, Ukraine,
Uzbekistan and Yemen, as well as in a number of international research projects related to
monetary and fiscal policies, currency crises, international financial architecture, EU and
EMU enlargement, perspectives of European integration, European Neighborhood Policy
and political economy of transition; World Bank and UNDP Consultant; Author of several
academic and policy papers, and editor of several book publications.
3
5. CASE Network Studies & Analyses No. 411 – The Global Financial Crisis and it’s Impact on …
4
Abstract
Emerging market economies were major beneficiaries of the economic boom before 2007.
More recently, they have become victims of the global financial crisis. Their future
development depends, to a large extent, on global economic prospects. Today the global
economy and the European economy are much more integrated and interdependent than
they were ten or twenty years ago. Every country must recognize its limited economic
sovereignty and must be prepared to deal with the consequences of global macroeconomic
fluctuations.
The statistical data for 2009 provides a mixed picture with respect to the impact of the crisis
on various groups of countries and individual economies. On average, Central and Eastern
Europe experienced a smaller output decline than the Euro area and the entire EU while the
CIS, especially its European part, contracted more dramatically. However, there was a deep
differentiation within each country group. Looking globally, richer countries, which are more
open to trade and in which the banking sector plays a larger role and which rely more on
external financing, suffered more than less sophisticated economies, which are less
dependent on trade and credit (especially from external sources). With some exceptions, the
previous good growth performance helped rather than handicapped countries in the CEE and
CIS regions in the crisis year of 2009.
The post-crisis recovery has been rather modest and incomplete. It remains vulnerable to
new shocks (like the Greek Fiscal crisis), the danger of sovereign default and other
uncertainties. Full post-crisis recovery and increasing potential growth will require far going
economic and institutional reforms on both national, regional (e.g., EU) and global levels.
6. CASE Network Studies & Analyses No. 411 – The Global Financial Crisis and it’s Impact on …
5
1. Introduction
In the early and mid-2000s, emerging market economies were major beneficiaries of the
economic boom which preceded the recent global financial and economic crisis. They have
become victims of the crisis, and their future development depends, to a large extent, on
global economic prospects, which are highly uncertain in the fragile post-crisis environment.
Although there have been domestic economic policies which can be given credit for some of
the early successes and then blamed for crisis-related problems, one cannot forget about the
role of external factors. Many of the small open economies of Central and Eastern Europe,
Latin America or Asia are dependent on external demand and capital flows originating from
their dominant economic partners such as the EU, US, Japan or China. This has made them
vulnerable to various shocks (both positive and negative) generated by those neighbors/
partners which are largely beyond their control and beyond the capacity of domestic policy to
cushion their impact (see Ganev, 2010 in respect to Bulgaria).
The above dependence results not only from formal integration arrangements such as EU
membership/ EU candidate status (which, by definition, means giving up some degree of
national sovereignty in economic and institutional spheres) or less binding free trade
agreements, but also from the much broader phenomenon of rapid globalization observed
during the last few decades. Thus, even the countries which do not belong to regional
integration blocks like the EU face serious limitations in their domestic economic policies due
to increasing global interdependence.
Today’s global and European economies are much more integrated and interdependent than
they used to be ten or twenty years ago, let alone during the post-World War II period. In an
environment of highly integrated global markets, each country (even the biggest ones like the
US, Japan, China or the EU as an entire block) must recognize its limited economic
sovereignty and must be prepared to deal with the consequences of global macroeconomic
fluctuations.
The purpose of this paper is to analyze the behavior of emerging-market economies during
the recent global financial crisis. Special attention is given to Central and Eastern Europe
7. CASE Network Studies & Analyses No. 411 – The Global Financial Crisis and it’s Impact on …
and the role of EU integration. The paper is policy-oriented and contains some general policy
recommendations.
6
1
The paper consists of eight sections. Section 2 contains a brief description of the period of
rapid economic growth in the early and mid 2000s and its sources. Section 3 deals with the
shock generated by the global financial crisis which erupted in mid 2007 in the US and hit
most of the emerging market economies in the second half of 2008. Section 4 analyzes the
depth of the recession in 2009 in various groups of countries and the factors determining this
depth. In section 5 we look at the consequences of the second shock generated by the
Greek fiscal crisis in spring 2010. Section 6 examines the role of the EU umbrella in
protecting Central and Eastern European economies against crisis-generated shocks. In
section 7 we discuss the potential future scenarios and risks associated with them. Finally,
section 8 summarizes the findings of this paper and offers some policy conclusions and
recommendations.
As macroeconomic and financial developments from 2007 onwards have had a very dynamic
character, the findings, conclusions and policy recommendations offered in this paper have a
tentative character, which is subject to further verification. The unfinished financial crisis story
also determines the analytical format and methodology used. The analysis is based on the
analytic-narrative method using simple comparative statistics illustrating major trends and
comparative cross-regional and cross-country analysis. There will be more opportunities to
conduct deeper and more sophisticated analyses at a later stage when more statistical
information on the crisis and its various impacts becomes available.
1
This paper has been prepared under the project on “Advisory Services on Macroeconomic Management and
Institutional Reform (ASMMIR)” for the Ministry of Economic Development of Azerbaijan. The project is being
conducted by CASE – Center for Social and Economic Research on the basis of Grant Agreement G-08-BPCS-
162136 signed between the British Petroleum Exploration (Caspian Sea) Ltd. and CASE. Earlier versions of this
paper or its fragments were presented at the IAI Global Outlook Seminar on “Central and Eastern Europe after
the crisis: scenarios of recovery and national responses” in Rome on January 29, 2010, the Conference on
“Inclusion completed, adaptation successful? - What divides new and old members in the European Union, 6
years on?” organized by the Center for EU Enlargement Studies of the Central European University and the
Friedrich Ebert Foundation in Budapest on May 14, 2010, and at the seminar organized by the Ministry of
Economic Development of Azerbaijan and BP in Baku on July 6, 2010. I would also thank Paulina Szyrmer for
editorial assistance.
8. CASE Network Studies & Analyses No. 411 – The Global Financial Crisis and it’s Impact on …
2. The golden period of global growth before 2008
The years 2003-2007 recorded a remarkable pace of global economic growth and
macroeconomic stability after quite good decade in the 1990s
7
2
(see Tables 1-5). Looking
back, this golden period of prosperity and relative stability resulted from a coincidence of
numerous supportive factors.
First and most importantly, the world economy benefited from comprehensive and far going
policy reforms conducted in a number of important countries and regions in the 1990s/ early
2000s (China, India, Russia, Central and Eastern Europe, Latin America, etc.). Second, after
two or more decades of macroeconomic turbulences caused by weak, and sometimes
openly populist macroeconomic policies, the vast majority of less developed countries
adopted a more prudent stance in this area. This resulted in an impressive disinflation trend
worldwide (see Figure 1), the rapid building up of international reserves and a substantial
improvement in fiscal balances. Third, these positive trends were accompanied by a unique
calm in global financial markets (no serious turbulences). Fourth, with a certain time lag, the
successful completion of the Uruguay round in the mid 1990s helped to liberalize the world’s
manufacturing trade and, partly, trade in the service sector. Fifth, the accommodative
monetary policy of the largest central banks conducted in the first half of the 2000s, the
aftermath burst of the so-called dotcom bubble and the 9/11 terrorist attacks have meant a
strong and positive demand shock for most less developed countries and strengthened their
economic boom.
Emerging market economies were the major beneficiaries of this boom, as they were
growing much faster than developed countries (which served as the main source of global
demand, especially the US) and were contributing to impressive progress in global economic
and social convergence (see Tables 1 and 5).
This trend was also experienced by the emerging market economies of Central and Eastern
Europe (see Table 2-4). In addition to the above mentioned positive global factors, the EU
new member states (NMS) benefited from gaining full access to the Single European Market
and a credibility premium upon EU accession (with the expectation of rapid entry into the
2
The entire period is sometimes called the period of Great Moderation; see Bernanke (2004).
9. CASE Network Studies & Analyses No. 411 – The Global Financial Crisis and it’s Impact on …
EMU). It seemed that financial markets considered the entire EU as a homogenous area
which was immune to adverse and country-specific macroeconomic and financial shocks. As
a result, NMS risk premia were below those of other emerging markets (Luengnaruemitchai
& Schadler, 2007).
Net capital inflows (and consequently, as a mirror phenomenon, current account deficits)
reached a record-high level especially in the smallest economies with currency boards or
fixed pegs such as the three Baltic countries and Bulgaria, which enjoyed a reputation of
being fiscally prudent and microeconomically flexible. To a lesser extent, a similar trend was
experienced by actual and potential EU candidates (i.e., Western Balkan countries and
Turkey). In turn, CIS countries which had no EU membership perspective (or even close
association) benefited from the global commodity boom. All post-communist economies
gained from the previous decade of painful economic reforms and restructuring.
3. The first shock: global financial crisis (2008)
Most of the favorable factors described in the previous section disappeared or even started
to have the opposite effect once the global financial crisis hit the entire world economy,
including Europe, in the summer of 2008.
In the financial sphere, liquidity and credit dried up, capital started to fly back to the main
financial centers (mostly US), stock markets and commodity prices declined (although there
was almost a one year time mismatch between the collapse of these two asset markets), risk
premia for both sovereign and private borrowing grew dramatically (see Figure 2 in respect to
sovereign borrowing of EU NMS), and many national currencies depreciated (especially in
countries which run floating exchange rate regimes) threatening the massive insolvency of
economic agents borrowing in foreign currencies. Some countries experienced banking
sector troubles. In the real sphere, external demand for exported goods and labor declined.
Neither EU membership, nor currency board regimes were considered by financial markets
as effective insurance against balance-of-payment and fiscal crises any longer (see Figure
2). Those NMS which managed to enter the EMU before the crisis (Slovenia, Cyprus, Malta
and Slovakia) minimized nominal shocks (especially those related to currency risks) but were
not able to use the exchange rate as a shock absorber. On the contrary, most countries with
8
10. CASE Network Studies & Analyses No. 411 – The Global Financial Crisis and it’s Impact on …
floating exchange rates experienced much bigger fluctuations of nominal variables (see
Table 6) but some of them (Poland) could accommodate faster to declining external demand.
The sharp fluctuations of nominal variables could lead to a serious disruption of the banking
and financial sectors and in some cases, such as in Ukraine or Russia, this risk did
materialize. However, in other countries, exchange rates and stock market indices started to
rebound from spring 2009, which helped them to avoid full-scale domestic financial crises.
The supportive policy of parent commercial banks from Western Europe backed by the
European Commission and IMF also contributed to the relative stability of their Central and
East European subsidiaries.
Three NMS (Hungary, Latvia and Romania), one high-income country of the European
Economic Area (Iceland), two EU potential candidates (Bosnia & Herzegovina, Serbia) and
six CIS economies (Armenia, Belarus, Georgia, Kyrgyzstan, Tajikistan and Ukraine) had to
resort to IMF assistance in the second half of 2008 and the beginning of 2009 to secure their
international liquidity and avoid both sovereign default and an uncontrolled run on their
currencies. In the spring of 2010, the first EMU member, i.e. Greece had to ask for external
financial aid (including the IMF program) because of its progressing public debt crisis (see
Section 5).
4. Economic performance in 2009 – a mixed picture
Over the period of 2008-2009, the expected impact of the global financial crisis on emerging
market economies remained the subject of frequently changing forecasts and speculations.
Throughout all of 2008, many believed that the negative consequences of the financial crisis
would be limited to the so-called advanced economies, mostly US, Western Europe and
Japan, and most emerging market economies would remain relatively unaffected. The IMF
World Economic Outlook Update released on November 6, 2008 (WEO, 2008, Table 1.1),
i.e. seven weeks after the Lehman Brothers bankruptcy triggered a global financial panic,
forecasted recession in most of the advanced economies for 2009. The actual recession was
much greater than that predicted in the report. The report also predicted only a modest
slowdown for emerging and developing economies. Such expectations may be based on the
concept of “decoupling” (WEO, 2007_Apr, Chapter 4, pp. 121-160; Kose et al., 2008)
9
11. CASE Network Studies & Analyses No. 411 – The Global Financial Crisis and it’s Impact on …
according to which business cycles in emerging market economies become increasingly
independent from those in advanced economies.
When it became clear that the crisis hit most emerging markets heavily, especially former
communist economies in Central and Eastern Europe and CIS, the previously optimistic
forecasts gave way to alarming expectations and comments like that of the World Bank
President Robert Zoellick’s on February 27, 2009
10
3
. Fortunately, these fears proved to be a bit
exaggerated. Ex-post, in spring 2010, the picture looked less dramatic and more nuanced.
The IMF April 2010 preliminary GDP statistics for 2009 gave some opportunity to examine
the depth of the crisis’ impact on various groups of countries and individual economies. The
imperfection of the available data was caused not only by its preliminary character (subject to
further revision) but also by the lack of a comparative set of quarterly GDP statistics.
Examination of the period of Q3 2008 – Q2 2009 or Q4 2008 – Q3 2009 would probably give
a better picture of the crisis’ length and impact than annual statistics for 2009. Some
countries were hit by the crisis already at the end of 2007/ beginning of 2008 while many
others were hit a half year or one year later. In many countries output recovery started
already in the second half of 2009 while in some others, the recession has not ended yet (so
the size of their cumulative output decline remained unknown at the time of writing this
paper).
Keeping these methodological problems in mind, Tables 1 and 2 show that, on average,
4
Central and Eastern Europe
experienced a smaller output decline than the Euro area and
the entire EU. On the contrary, the CIS, especially its European part contracted more
dramatically (see Table 4). At first glance, this might suggest that EU membership/ close
association with the EU (the case of actual and potential EU candidates see Table 3)
continued to provide some kind of protection umbrella for European emerging-market
economies even in a time of distress. However, this conclusion seems to be premature and
not necessarily well-grounded in reality.
Actually, there was a deep differentiation within each country group. Among NMS (Table 2)
the deepest (two-digit) contraction was experienced by the three Baltic countries while
3
http://www.ft.com/cms/3cf2381c-c064-11dd-9559-000077b07658.html
4
According to the IMF regional classification, i.e. including 7 NMS (Bulgaria, Estonia, Hungary, Latvia, Lithuania,
Poland and Romania) and 8 EU actual and potential candidates (Albania, Bosnia & Herzegovina, Croatia,
Kosovo, Macedonia, Montenegro, Serbia and Turkey).
12. CASE Network Studies & Analyses No. 411 – The Global Financial Crisis and it’s Impact on …
5
and Cyprus and Malta experienced only a
Poland recorded a modest positive growth
modest decline (less than 2%). Within the group of actual and potential EU candidates (Table
3), Kosovo and Albania recorded positive growth and Macedonia recorded a marginal
decline (by 0.7%). The biggest recession hit tourism-dependent Montenegro and Croatia
(respectively -7.0% and -5.4%).
However, even greater differences can be observed within the CIS (Table 4): Ukraine
contracted by 15.1%, Armenia by 14.4%, Russia by 7.9%, and Moldova by 6.5%. On the
other hand, all 5 Central Asian countries, Azerbaijan, and Belarus continued growing, in
some cases (Azerbaijan and Uzbekistan) at a pretty high rate.
Among large non-European emerging markets, China and India continued growing at pretty
high rates while Brazil recorded almost no decline (-0.2% - see Table 5). These results may
partly validate the decoupling hypothesis discussed earlier.
Equally difficult is the analysis of the factors which determined the size and length of the
crisis-related shocks and resilience of individual economies against them. Some early
opinions like that stressing the importance of the exchange rate regime
11
6
do not necessarily
hold true when a larger pool of countries and full 2009 data are analyzed.
In order to identify factors which might determine a country’s vulnerability/ resilience to crisis-generated
shocks, we ran a series of simple graphical analyses where we plotted 2009 GDP
performance against various other variables available either in the IMF World Economic
Outlook or the World Bank World Development Indicators databases. Figures 3-8 analyze
factors which determine the depth of the shock using global macroeconomic statistics.
Figures 3a-8a do the same in respect to Europe and the CIS region. The results of this
graphical analysis do not offer any strong conclusions especially if one takes into
consideration the preliminary character of some of the data available and other
methodological problems involved
7
.
Global statistics tell us that the growth rate of real GDP in 2009 was negatively correlated
with GDP PPP per capita level in 2006 (Figure 3), the exports-to-GDP ratio in 2006 (Figure
5
Due to Poland’s economic potential (ca. half of the GDP of all NMS), its positive growth record affected the
average performance of the entire CEE group.
6
See e.g. Aslund (2009) who underlined the advantage of flexible exchange rate and inflation targeting over the
fixed pegs in the group of former communist economies.
13. CASE Network Studies & Analyses No. 411 – The Global Financial Crisis and it’s Impact on …
4), and the domestic credit-to-GDP ratio in 2006 (Figure 5). It was positively correlated with
the average current account balance in 2005-2007 (Figure 7) and the average rate of
economic growth in 2003-2007 (Figure 8). There is no correlation between 2009 growth
performance and the rate of growth of broad money (M2) in the period of 2001-2007 (Figure
6). Putting these results in less technical language, one can conclude that richer countries,
which are more open to trade, in which the banking sector plays a bigger role and which rely
more on external financing suffer more than less sophisticated economies, which are less
dependent on trade and credit (especially from external sources). The previous good growth
performance helped rather than handicapped growth in the crisis year of 2009 although there
were some exceptions, especially in Central and Eastern Europe and the CIS.
When one limits the analyzed cross-country panel to Europe and CIS, the correlations
remain the same in terms of direction but not in terms of strength. Three of the above
mentioned correlations – between the growth rate of real GDP in 2009 and GDP PPP per
capita level in 2006 (Figure 3a), exports-to-GDP ratio in 2006 (Figure 4a) and domestic
credit-to-GDP ratio in 2006 (Figure 5a) are negative but weaker for Europe and CIS than
globally. The same concerns the positive correlation between the 2009 growth rate and the
average growth rate in 2003-2007 (Figure 8a), which is weaker for Europe and the CIS.
However, another positive correlation – between the 2009 growth rate and the average
current account balance in 2005-2007 (Figure 7a) – proved to be stronger for Europe and the
CIS than globally. Finally, the correlation between 2009 growth performance and the average
rate of growth of broad money (M2) in 2001-2007 (Figure 6a) shows a very weak negative
sign, which can be considered as insignificant.
Going beyond these general observations would require an analysis of structural data (e.g.
the share of various sectors and industries) which are not available in terms of a cross-country
comparative dataset. The only available figure of this kind, the average growth rate
of the group of fuel exporters (see Table 1), indicates that they were more heavily hit in 2009
than other economies. Some anecdotal evidence may suggest that large shares of the
construction, metallurgy, the automobile industries or the financial sector made the recent
recession more severe.
7
The earlier comments on the imperfection of 2009 GDP data as the proxy of crisis length and depth also apply
to this analysis.
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5. The second shock: European and global public debt crisis
At the end of 2009 and beginning of 2010, the general mood in the global and European
economy became more optimistic again. The worse case scenario, i.e. the danger of a long-lasting
and devastating Great Depression style crisis seemed to be left behind. There were
several signs of the revival of financial markets, global trade and the real sector. The
emerging market economies, especially those in Asia and Latin America started to attract
capital inflows again (less so in Europe although market sentiments improved here too). This
optimistic mood did not last long, however. The new blow came from the Greek public debt
8
crisis,
which erupted in the first quarter of 2010 and culminated in early May 2010, before
the EU governing bodies and the IMF agreed on a rescue package for Greece.
The repercussions of Greece’s fiscal troubles went far beyond the boundaries of this
relatively small economy. First, this was the first open public debt crisis experienced by a
member country of the Economic and Monetary Union since its launch in 1999 and financial
markets tested the degree of actual fiscal solidarity within the Euro area.
Second, the Greek episode placed market attention on similar vulnerabilities in other
Northern Mediterranean economies (Italy, Portugal and Spain) and several other developed
countries, including all G7 members except Canada (see Tables 7 and 8). A year earlier the
call for a substantial fiscal stimulus in all EU member countries overshadowed fiscal
sustainability concerns which proved deeply wrong (see Dabrowski, 2009). Table 8 clearly
demonstrates how difficult will be to stop the rapid increase in public debt to GDP ratio in
most of the leading developed countries unless a dramatic fiscal adjustment is undertaken in
the near future.
Third, the potential danger of Greek sovereign default served as a reminder about the
continuing fragility of European banks and other financial institutions which did not recover
fully from the post-Lehmann shock at the end of 2008 and could face big problems in the
case of any new turbulence. Although the pan-European bank stress test completed in July
8
Called by many commentators and market participants as the crisis of the Euro, which does not seem to be a
correct interpretation. Although somewhat weakened against the US dollar, the Euro did not become a subject of
speculative attack as normally happens in the case of a currency crisis.
13
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2010 seemed to demonstrate that these fears were exaggerated,
14
9
some experts questioned
the macroeconomic assumptions used in this test (especially with respect to risks associated
with government bonds - see Jenkins, 2010) and banks’ honesty in disclosing all off-balance-sheet
transactions.
Although the debt indicators in Central and Eastern Europe look, on average, better than
those in Western and Southern Europe, some of the EU NMS (Hungary and Poland) may
face serious fiscal problems in the not so distant future unless they undertake corrective
measures in time. Other CEE countries may suffer from the negative contagion effects
generated by the fiscal problems of either peripheral EMU members or less fiscally prudent
neighbors. The increased volatility of CEE exchange rates and bond yields in April and May
2010 (i.e. before and immediately after adopting a rescue package for Greece) may serve as
a good indication of their potential macroeconomic vulnerability. Consequently, their financial
systems, especially commercial banks, may also suffer from the increased exchange rate
volatility as well as from the potential problems of their mother banks in Western Europe.
6. The role of the EU/EMU umbrella
As mentioned in the previous sections, the EU NMS and EU actual and potential candidates
in South-Eastern Europe enjoyed several benefits of their progressive integration with the
Single European Market and their adoption of EU institutions, standards and policies in the
early and mid-2000s. One of these benefits was related to rapidly decreasing risk premia and
the perception of financial markets that this region was moving from the ‘emerging market’
category into the class of advanced and matured economies. Very few believed that any part
of the EU (including its new Eastern and South Eastern peripheries) would be ever hit by
serious macroeconomic turbulence. So EU membership was considered solid insurance
against potential instability.
Going further, joining the Economic and Monetary Union seemed to provide even more
macroeconomic stability and security. Once an EMU candidate country adopted the credible
strategy of joining the single currency area and financial markets became convinced of the
successful outcome of this strategy, that country’s risk premium would fall rapidly. This was
9
Only 7 out of 91 tested banks failed to pass the test (BBC, 2010) and the troubles of these 7 institutions were
16. CASE Network Studies & Analyses No. 411 – The Global Financial Crisis and it’s Impact on …
the case of Italy prior to its 1999 launch of the Euro zone and Greece prior to its 2001 EMU
accession (see Figure 9). The same phenomenon was repeated later when the EU NMS
started to join the EMU.
The spread between yields charged on government bonds of the most indebted EMU
members (such as Greece or Italy) and the bonds of Germany remained very low for the first
decade of the Euro’s existence (see Figure 9). This might be interpreted as the dominant
belief of financial markets in either the successful work of EU/EMU fiscal discipline rules as
defined in the Treaty and Stability and Growth Pact or in the eventual bailing out of the
countries in fiscal troubles by other EU/EMU members even if it went against both the letter
and spirit of the Maastricht Treaty
15
10
.
The global financial crisis dramatically verified the above assumptions, which have not been
well grounded in the real political, institutional and financial architecture of the EU. The crisis
confirmed what was quite obvious before. First, the fiscal surveillance rules in the EU and
EMU were pretty weak from the very beginning and became additionally watered down by
the reform of SGP in 2005. Second, the EU lacked both fiscal capacity and the operational
mechanisms to provide rescue packages to member states in trouble. The same lack of
capacity concerned the rescue mechanism of the European financial sector, a mechanism
that was sorely needed at the end of 2008. Its lack threatened the disintegration of the Single
European Market when individual governments had to come with national bailout packages,
which were not always well coordinated (Dabrowski, 2010).
The first wave of troubles on the sovereign debt front in the second half of 2008 and the
beginning of 2009 was modest enough to remain manageable under the then existing
mechanisms, i.e. IMF stand-by programs augmented by EU resources (for non-Euro area
member states) and bilateral aid packages. The three EU NMS (Hungary, Latvia and
Romania) became the subject of such joint IMF-EU financial assistance.
However, at the beginning of 2010, the crisis got closer to the EU core, attacking the
periphery of the Euro area. Greece was fighting dramatically with the danger of public debt
known before the test exercise started.
10
The current (Lisbon) version of the Treaty of the Functioning of the European Union Article 125.1 (former Article
103.1 of the Treaty Establishing the European Community) explicitly states: “The Union shall not be liable for or
assume the commitments of central governments, regional, local or other public authorities, other bodies
governed by public law, or public undertakings of any Member State, without prejudice to mutual financial
guarantees for the joint execution of a specific project. A Member State shall not be liable for or assume the
commitments of central governments, regional, local or other public authorities, other bodies governed by public
17. CASE Network Studies & Analyses No. 411 – The Global Financial Crisis and it’s Impact on …
default and some other EMU members (notably Portugal, Spain, and Ireland) experienced
downgrades of their credit ratings and repeated crises of market confidence. The political
disagreement within the Euro group on the scale and ways of supporting Greece not only
dramatically deepened the problems of Greece itself but also undermined (at least
temporarily) the market belief at the sustainability of the Euro project and the chances of EU
members in trouble to receive support other than the standard IMF programs. This had to
lead to the increase of risk premia on the sovereign debt instruments of several EU
members.
Once again, the EU’s Eastern periphery has been seriously affected by market uncertainties
this time caused by Greece’s crisis. In spite of the Euro depreciation against the US dollarthe
Swiss frank and other major freely floating CEE currencies such as the Czech crown, the
Hungarian forint, the Polish zloty, the Romanian lei or the Turkish lira depreciated even more
(both to EUR and USD).
Finally, on May 9, 2010, ECOFIN agreed to establish the European Financial Stabilization
Mechanism which consists of €60 billion of the EU’s own resources and €440 billion of the
Special Purpose Vehicle that is guaranteed on a pro rata basis by participating member
states (ECOFIN, 2010). More importantly, this mechanism is backed by IMF resources (IMF,
2010). Greece became the first beneficiary of this mechanism (closely coordinated with the
standard IMF stand-by loan and its conditionality).
This, however, is only a temporary and emergency solution. In the long-term a permanent
crisis resolution mechanism needs to be set up at the EU level, in addition to stronger fiscal
surveillance rules (see e.g. European Commission, 2010). Greece’s problems are only the tip
of a rapidly growing fiscal liability iceberg of the EU member states. On the other hand, such
a mechanism must respect the limitation coming from the above mentioned Article 125 of
TFEU and, even more importantly, avoid moral hazard problems associated with a country’s
potential bailout.
Based on the experience of the crisis years of 2008-2010, one can draw the conclusion that
EU or even EMU membership cannot be considered an absolute shield against serious
macroeconomic and financial shocks. The earlier naïve expectation of financial markets in
respect to absolutely safe sovereign borrowing within the EMU proved unjustified and wrong.
However, EU/EMU membership offers some additional external support on top of the
law, or public undertakings of another Member State, without prejudice to mutual financial guarantees for the joint
execution of a specific project.” – see http://eur-lex.europa.eu/JOHtml.do?uri=OJ:C:2010:083:SOM:EN:HTML
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standard IMF rescue programs which have been seriously expanded and modernized in the
last few years (as a result of the influence of EU shareholders on the IMF among other
reasons – see Aslund, forthcoming, Chapter 5).
Furthermore, EMU membership continues to eliminate exchange-rate-related risk premia,
contributing to a more stable macroeconomic and financial environment. From this point of
view, the continuation of efforts to join the EMU by those NMS which remain outside the
Euro area makes sense. In comparison, countries which joined the EMU in recent years and
run responsible fiscal policies (Slovenia, Cyprus, Malta and Slovakia) have gone through the
crisis without serious financial and macroeconomic turbulences.
7. Looking ahead: what can happen next?
The continuing macroeconomic uncertainty makes it difficult to predict what may happen in
both the near and more distant future. The IMF April and July 2010 forecasts (see the last
column of Tables 1-5) suggest that recovery in 2010 will not be fast and will not be enjoyed
by all countries: those which recorded the deepest recession in 2008-2009 may continue to
experience recession or stagnation (see also Slay, 2010).
On average, CEE and CIS countries have the chance to grow faster than the Euro area and
the entire EU. This gives them the opportunity to continue the catching up process, although
at a slower pace than during the boom preceding the recent crisis. However, the picture will
be uneven within each regional group/subgroup as it was in 2009. And returning to the pre-crisis
boom does not seem likely at least in the near future. In addition, the overall
macroeconomic environment will be less comfortable, with higher debt-to-GDP ratios in most
countries, and tighter credit conditions. The EU NMS (including those which already entered
or will enter the EMU) and EU candidate countries cannot count on lower risk premia
generated by the EU/ EMU “umbrella” any longer. Its role was seriously reassessed by
financial markets both at the end of 2008 and at the beginning of 2010.
In the slightly longer term, the situation of emerging market economies, especially those
located in Europe and on its periphery, will depend on how the world economy manages to
overcome the crisis and its underlying roots. The two potential scenarios seem to be
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particularly dangerous for this group of countries. If the global economy experiences a so-called
double deep recession (which could be caused by premature tightening of
macroeconomic policies in major advanced economies, a public debt crisis or a new round of
troubles in the financial sector), emerging market economies will be hit again on the demand
side and may react more strongly on the down than their developed counterparts. However,
if the monetary and fiscal stimulus is not withdrawn in time, there will be the danger of
another kind of trouble: higher inflation (perhaps stagflation), new imbalances and new
bubbles. Under such a scenario, emerging market economies in Central and Eastern Europe
can easily become the first victims of a new macroeconomic and financial crisis.
8. Conclusions and recommendations
The global financial crisis of 2007-2009 had severe consequences for the entire world
economy, including emerging market economies. Even if it lasted shorter than one might
have expected at the very beginning (when the association with the Great Depression period
of the early 1930s was quite popular), the consequences of the crisis will be felt for a long
time. Several countries were hit quite significantly, losing a substantial portion of their GDP.
In most of these countries, part of the earlier accomplished progress in poverty reduction has
been reversed, although there is insufficient statistical data as of yet to assess the scale of
damage in this area. Their fiscal accounts also deteriorated, their indebtedness increased,
and in some cases, the credibility of their national currencies was also damaged
(demonstrated by the increasing share of spontaneous dollarization/ euroization). Recovering
these loses will not be easy and will take time.
The output rebound experienced since mid-2009 is rather weak so far and subject to various
uncertainties. New rounds of financial and macroeconomic turbulences are possible as
demonstrated by the consequences of the Greek fiscal crisis in the spring of 2010. Financial
conditions are and will remain tighter as compared to the pre-crisis situation. Credit will be
more expensive and less available for both the private sector and most sovereign borrowers.
The financial markets will scrutinize the economic policies of individual countries more
seriously then they used to through most of the last decade.
The above-mentioned issues mean that the golden era of rapid and easy economic growth
(in the sense that it did not require serious economic policy effort) is unlikely to return soon. A
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higher rate of economic growth and the continuation of the catching up process by lower-income
economies is still possible, but would require a new round of economic reforms in
both individual countries and at the global and regional levels.
On a national level, the economic reform agenda depends very much on individual country
situations and characteristics. However, there are some common challenges shared by
larger groups of countries. First, the rapidly growing public debt in most countries must be
stopped as soon as possible. This will require a far-reaching fiscal adjustment and will be
impossible, in most cases, without the revision of major expenditure programs, especially in
the social welfare sphere. All developed countries and some emerging-market economies
(especially those in Central and Eastern Europe) must neutralize the fiscal and other
consequences of population aging and decline. Increasing both the formal and effective
retirement age seems to be the best response. A greater openness to immigration (contrary
to widespread populist fears in many countries) could be another good recipe.
A radical overhaul of the welfare systems and labor regulations is important not only for
balancing government accounts but also for making labor markets more flexible, i.e.
overcoming the serious obstacles to economic growth in continental Europe, including most
of the EU NMS and EU candidate countries.
Most middle and low-income countries (including CIS, Middle East and North Africa, and
Western Balkans) need to work hard on improving their business and investment
environments, upgrading their legal and public administration systems, fighting corruption,
etc. to be able to attract more investment flows. The deregulation agenda is also important in
the developed world, particularly in continental Europe and Japan. Many countries should
continue the privatization of their public enterprises, including the quick withdrawal of public
ownership from those financial institutions which received emergency capital injections from
public sources in 2008-2009.
There is also a large, perhaps even more complex and difficult reform agenda on the
supranational level as the crisis demonstrated a high degree of global interdependence and
the limits of both national policies and regulations. First of all, this concerns global financial
markets and institutions where both close coordination of national regulations and the
building of global standards, regulations and supervisory institutions is required. The same
concerns some form of coordination of macroeconomic policies between the biggest players
which the G20 tried to do recently with mixed results. Finally, it is time to conclude global
trade negotiations that began a decade ago under the Doha round even if the crisis and
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recession have created the temptation for protectionist policies at national levels. In spite of
populist rhetoric, developing and transition countries may become the major beneficiaries of
the new round of global trade liberalization (as happened after the conclusion of the
Marrakesh agreement in 1994).
The same concerns the regional level, especially in Europe. The EU must complete building
a Single European Market, especially in respect to the services and financial sectors. Some
deregulation of product markets, especially for agriculture goods, would be also beneficial for
the future growth of both EU member states and its trade partners. Accelerating EU
Enlargement (in respect to the Western Balkan countries and Turkey) would bring greater
economic, financial and political stability to this part of Europe and make the Single
European Market more vibrant and competitive. The same concerns EMU enlargement
which can offer more macroeconomic and financial stability to those NMS which are still
outside the Euro area.
Having well coordinated economic policy and economic reforms on a supranational level is
probably the most important lesson which can be drawn from the recent crisis experience.
No country can claim to be immune to global and regional shocks. National economic
policies and reforms on a national level still matter a lot but they must be well coordinated
regionally and globally. Any policy measure taken on a national level must be also judged
against its externalities, i.e. its impact on other economies.
This relates not only to the measures which directly affect the competitiveness of other
countries such as trade, investment and labor market protectionism, competitive
devaluations of national currencies and other types of beggar-thy-neighbor policies. The
leading developed countries and large economies must be aware that their macroeconomic
policy decisions affect not only their economies but also most others’, including those in the
developing world. For example, if the US Federal Reserve Board or ECB decide on interest
rates and other (so-called quantitative) monetary policy measures, this determines not only
domestic liquidity in the US or Euro area but also the international one (given the
international role of these currencies). Perhaps in the short term such externalities can be
disregarded but after some time the international consequences of such decisions
boomerang back to their authors. Unfortunately, these externalities are not always taken into
account for both institutional (accountability to domestic constituencies) and analytical
reasons (lack of adequate conceptual and analytical framework for global macroeconomic
analyses).
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21
References
Ali, S., Dadush, U. & Falcao, L. (2009): Financial Transmission of the Crisis: What’s the
Lesson?, International Economic Bulletin, Carnegie Endowment for International Peace,
June,
http://www.carnegieendowment.org/publications/index.cfm?fa=view&id=23284&prog=zgp&pr
oj=zie
Aslund, A. (2009): The East European Financial Crisis, CASE Network Studies and
Analyses, No. 395, December
Aslund, A. (forthcoming): The Last Shall Be the First: The East European Financial Crisis,
Peterson Institute for International Economics, Washington, DC
BBC (2010): Seven EU banks fail stress tests, BBC News Bulletin, July 23,
http://www.bbc.co.uk/news/business-10732597
Bernanke, B. (2004): The Great Moderation, remarks delivered at the meetings of the
Eastern Economic Association, Washington, DC, February 20
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12/2009
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Systems, Vol. 34, Issue 1, pp. 38-54
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May 9/10, Council of the European Union, Press Release, 9596/10,
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European Commission (2010): Reinforcing economic policy coordination, Communication
from the Commission to the European Parliament, the European Council, the Council, the
European Central Bank, the Economic and Social Committee and the Committee of the
Regions, May 12, http://ec.europa.eu/economy_finance/articles/euro/documents/2010-05-12-
com(2010)250_final.pdf
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CASE Network E-Briefs, No. 11/2010.
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Kose, M.A., Otrok, Ch. & Whiteman, Ch. (2008): Understanding the Evolution of World
Business Cycles, Journal of International Economics, Vol. 75, Issue 1, May, pp. 110-130.
IMF (2010): IMF Executive Board Approves €30 Billion Stand-By Arrangement for Greece,
IMF Press Release, No. 10/187, http://www.imf.org/external/np/sec/pr/2010/pr10187.htm
Jenkins, P. (2010): Stress test results ‘underwhelming’, Financial Times, July 26,
http://www.ft.com/cms/s/0/bffedb22-98e2-11df-9418-00144feab49a.html
Luengnaruemitchai, P. & Schadler, S. (2007): Do Economists’ and Financial Markets’
Perspectives on the New Members of the EU Differ?, IMF Working Paper, WP/07/65
Slay, B. (2010): The Region’s Bifurcated Economic Recovery, United Nations Development
Programme, Europe and CIS, Office of the Senior Economist, September 10,
http://europeandcis.undp.org/senioreconomist/show/FB11FF1D-F203-1EE9-
BCFECC81AE62E14B.
WEO (2007_Apr): World Economic Outlook Update, International Monetary Fund,
Washington, D.C., April.
WEO (2008_Nov): Rapidly Weakening Prospects Call for New Policy Stimulus, World
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Washington, D.C., April.
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24. CASE Network Studies & Analyses No. 411 – The Global Financial Crisis and it’s Impact on …
23
Tables and Figures
Table 1: Annual growth of real GDP, in %, 2003-2010, major regions
Region 2003 2004 2005 2006 2007 2008 2009 2010
World 3.6 4.9 4.5 5.1 5.2 3.0 -0.6 4.6
G7 1.8 2.9 2.4 2.6 2.2 0.2 -3.4 2.4
EU 1.5 2.7 2.2 3.4 3.1 0.9 -4.1 1.0
Euro area 0.8 2.2 1.7 3.0 2.8 0.6 -4.1 1.0
Emerging & developing economies 6.2 7.5 7.1 7.9 8.3 6.1 2.4 6.8
CEE 4.8 7.3 5.9 6.5 5.5 3.0 -3.7 3.2
CIS 7.7 8.2 6.7 8.5 8.6 5.5 -6.6 4.3
MENA 6.9 5.8 5.4 5.7 5.6 5.1 2.4 4.5
Developing Asia 8.2 8.6 9.0 9.8 10.6 7.9 6.6 9.2
Sub-Saharan Africa 5.0 7.1 6.3 6.5 6.9 5.5 2.1 5.0
Western Hemisphere 2.2 6.0 4.7 5.6 5.8 4.3 -1.8 4.8
Fuel exporters 7.0 7.9 6.7 7.2 7.2 5.3 -1.8 4.0
Note: Yellow field means IMF April 2010 estimates, red field – IMF July 2010 estimate
Source: International Monetary Fund, World Economic Outlook Database, April 2010; fuel exporters – WEO
(2010_Apr), Table A1, p. 155.
25. CASE Network Studies & Analyses No. 411 – The Global Financial Crisis and it’s Impact on …
Table 2: Annual growth of real GDP, in %, 2003-2010, EU and EEA
Country 2003 2004 2005 2006 2007 2008 2009 2010
EU-15
Austria 0.8 2.5 2.5 3.5 3.5 2.0 -3.6 1.3
Belgium 0.8 3.1 2.0 2.8 2.8 0.8 -3.0 1.2
Denmark 0.4 2.3 2.4 3.4 1.7 -0.9 -5.1 1.2
Finland 2.0 4.1 2.9 4.4 4.9 1.2 -7.8 1.3
France 1.1 2.3 1.9 2.4 2.3 0.3 -2.2 1.4
Germany -0.2 1.2 0.7 3.2 2.5 1.2 -5.0 1.4
Greece 5.9 4.6 2.2 4.5 4.5 2.0 -2.0 -2.0
Ireland 4.4 4.6 6.2 5.4 6.0 -3.0 -7.1 -1.5
Italy 0.0 1.5 0.7 2.0 1.5 -1.3 -5.0 0.9
Luxembourg 1.5 4.4 5.4 5.6 6.5 0.0 -4.2 2.1
Netherlands 0.3 2.2 2.0 3.4 3.6 2.0 -4.0 1.3
Portugal -0.8 1.5 0.9 1.4 1.9 0.0 -2.7 0.3
Spain 3.1 3.3 3.6 4.0 3.6 0.9 -3.6 -0.4
Sweden 1.9 4.1 3.3 4.2 2.6 -0.2 -4.4 1.2
UK 2.8 3.0 2.2 2.9 2.6 0.5 -4.9 1.2
EU-12
Bulgaria 5.0 6.6 6.2 6.3 6.2 6.0 -5.0 0.2
Cyprus 1.9 4.2 3.9 4.1 5.1 3.6 -1.7 -0.7
Czech Republic 3.6 4.5 6.3 6.8 6.1 2.5 -4.3 1.7
Estonia 7.6 7.2 9.4 10.0 7.2 -3.6 -14.1 0.8
Hungary 4.3 4.9 3.5 4.0 1.0 0.6 -6.3 -0.2
Latvia 7.2 8.7 10.6 12.2 10.0 -4.6 -18.0 -4.0
Lithuania 10.2 7.4 7.8 7.8 9.8 2.8 -15.0 -1.6
Malta -0.3 0.7 3.9 3.6 3.8 2.1 -1.9 0.5
Poland 3.9 5.3 3.6 6.2 6.8 5.0 1.7 2.7
Romania 5.3 8.5 4.1 7.9 6.3 7.4 -7.1 0.8
Slovakia 4.8 5.0 6.7 8.5 10.6 6.2 -4.7 4.1
Slovenia 2.8 4.3 4.5 5.8 6.8 3.5 -7.3 1.1
EEA
Iceland 2.4 7.7 7.5 4.6 6.0 1.0 -6.5 -3.0
Norway 1.0 3.9 2.7 2.3 2.7 1.8 -1.5 1.1
Switzerland -0.2 2.5 2.6 3.6 3.6 1.8 -1.5 1.5
Note: Yellow field means IMF April 2010 estimates, red field – IMF July 2010 estimate
Source: International Monetary Fund, World Economic Outlook Database, April 2010
Table 3: Annual growth of real GDP, in %, 2003-2010, EU candidates
Country 2003 2004 2005 2006 2007 2008 2009 2010
Albania 5.8 5.7 5.8 5.4 6.0 7.8 2.8 2.3
Bosnia & Herzegovina 3.5 6.3 4.3 6.2 6.5 5.4 -3.4 0.5
Croatia 5.0 4.3 4.2 4.7 5.5 2.4 -5.8 0.2
Kosovo 5.4 2.6 3.8 3.8 4.0 5.4 4.0 4.8
Macedonia 2.8 4.1 4.1 3.9 5.9 4.8 -0.7 2.0
Montenegro 2.5 4.4 4.2 8.6 10.7 6.9 -7.0 -1.7
Serbia 2.4 8.3 5.6 5.2 6.9 5.5 -2.9 2.0
Turkey 5.3 9.4 8.4 6.9 4.7 0.7 -4.7 5.2
Note: Yellow field means IMF estimates
Source: International Monetary Fund, World Economic Outlook Database, April 2010
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Table 4: Annual growth of real GDP, in %, 2003-2010, CIS
Country 2003 2004 2005 2006 2007 2008 2009 2010
Armenia 14.0 10.5 13.9 13.2 13.7 6.8 -14.4 1.8
Azerbaijan 10.5 10.2 26.4 34.5 25.0 10.8 9.3 2.7
Belarus 7.0 11.5 9.4 10.0 8.6 10.0 0.2 2.4
Georgia 11.1 5.9 9.6 9.4 12.3 2.3 -4.0 2.0
Kazakhstan 9.3 9.6 9.7 10.7 8.9 3.2 1.2 2.4
Kyrgyzstan 7.0 7.0 -0.2 3.1 8.5 8.4 2.3 4.6
Moldova 6.6 7.4 7.5 4.8 3.0 7.8 -6.5 2.5
Russia 7.3 7.2 6.4 7.7 8.1 5.6 -7.9 4.3
Tajikistan 10.2 10.6 6.7 7.0 7.8 7.9 3.4 4.0
Turkmenistan 17.1 14.7 13.0 11.4 11.6 10.5 4.2 12.0
Ukraine 9.6 12.1 2.7 7.3 7.9 2.1 -15.1 3.7
Uzbekistan 4.2 7.7 7.0 7.3 9.5 9.0 8.1 8.0
Note: Yellow field means IMF April 2010 estimates, red field – IMF July 2010 estimate
Source: International Monetary Fund, World Economic Outlook Database, April 2010
Table 5: Annual growth of real GDP, in %, 2003-2010, other major countries
Country 2003 2004 2005 2006 2007 2008 2009 2010
Brazil 1.1 5.7 3.2 4.0 6.1 5.1 -0.2 7.1
China 10.0 10.1 10.4 11.6 13.0 9.6 8.7 10.5
India 6.9 7.9 9.2 9.8 9.4 7.3 5.7 9.4
Japan 1.4 2.7 1.9 2.0 2.4 -1.2 -5.2 2.4
Korea 2.8 4.6 4.0 5.2 5.1 2.3 0.2 4.5
US 2.5 3.6 3.1 2.7 2.1 0.4 -2.4 3.3
Note: Yellow field means IMF April 2010 estimates, red field – IMF July 2010 estimate
Source: International Monetary Fund, World Economic Outlook Database, April 2010
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Table 6: Countries most affected by the financial crisis through financial channels,
Sept. 2008 – May 2009
Note: **Rank from most to least affected. The country with the greatest currency depreciation was given a 1 (data
from Wall Street Journal). Local currencies were compared to U.S. dollar, U.S. given 0 percent in currency
depreciation. The country with the largest percentage drop in equity markets was given a 1 (data from World Bank
GEM, Japan data from MSCI Barra). The country with the largest growth in bond spreads was given a 1 (data for
EU countries from The Economist; data for remaining countries from World Bank GEM). EU bond spreads were
compared to the German bund, while other bond spreads were compared to U.S. Treasuries (U.S. and German
were given 0).
26
Source: Ali, Dadush & Falcao (2009)
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Table 7: Europe: Gross debt to GDP, in %, 2004-2009
Region/ Country 2004 2005 2006 2007 2008 2009
EU-27 62.2 62.7 61.4 58.8 61.6 73.6
Euro area 69.5 70.1 68.3 66.0 69.4 78.7
Austria 64.8 63.9 62.2 59.5 62.6 66.5
Belgium 94.2 92.1 88.1 84.2 89.8 96.7
Bulgaria 37.9 29.2 22.7 18.2 14.1 14.8
Czech Republic 30.1 29.7 29.4 29.0 30.0 35.4
Cyprus 70.2 69.1 64.6 58.3 48.4 56.2
Denmark 44.5 37.1 32.1 27.4 34.2 41.6
Estonia 5.0 4.6 4.5 3.8 4.6 7.2
Germany 65.7 68.0 67.6 65.0 66.0 73.2
Greece 98.6 100.0 97.8 95.7 99.2 115.1
Hungary 59.1 61.8 65.6 65.9 72.9 78.3
Ireland 29.7 27.6 24.9 25.0 43.9 64.0
Finland 44.4 41.8 39.7 35.2 34.2 44.0
France 64.9 66.4 63.7 63.8 67.5 77.6
Italy 103.8 105.8 106.5 103.5 106.1 115.8
Latvia 14.9 12.4 10.7 9.0 19.5 36.1
Lithuania 19.4 18.4 18.0 16.9 15.6 29.3
Luxembourg 6.3 6.1 6.5 6.7 13.7 14.5
Malta 72.1 70.2 63.7 61.9 63.7 69.1
Netherlands 52.4 51.8 47.4 45.5 58.2 60.9
Poland 45.7 47.1 47.7 45.0 47.2 51.0
Portugal 58.3 63.6 64.7 63.6 66.3 76.8
Romania 18.7 15.8 12.4 12.6 13.3 23.7
Slovakia 41.5 34.2 30.5 29.3 27.7 35.7
Slovenia 27.2 27.0 26.7 23.4 22.6 35.9
Spain 46.2 43.0 39.6 36.2 39.7 53.2
Sweden 51.3 51.0 45.7 40.8 38.3 42.3
UK 40.6 42.2 43.5 44.7 52.0 68.1
Iceland : 26.0 27.9 29.1 57.4 :
Norway 45.6 44.5 55.3 52.4 49.9 43.7
Note: Blue fields indicate countries where the public debt to GDP ratio increased by 15 percentage points or more
in the period of 2007-2009
Source: Eurostat, http://appsso.eurostat.ec.europa.eu/nui/show.do?dataset=gov_dd_edpt1&lang=en
Table 8: G7: Gross public debt to GDP, in % (2005-2015)
Country 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Canada 70.3 68.7 64.2 70.4 81.6 82.3 80.9 78.7 76.2 73.4 70.5
France 66.3 63.7 63.8 67.5 77.4 84.2 88.6 91.6 93.2 94.3 94.8
Germany 68.0 67.6 65.0 65.9 72.5 76.7 79.6 81.4 82.1 82.0 81.5
Italy 105.8 106.5 103.4 106.0 115.8 118.6 120.5 121.6 122.8 123.9 124.7
Japan 191.1 190.1 187.7 198.8 217.6 227.3 234.1 240.1 244.0 246.7 248.8
UK 42.1 43.2 44.1 52.0 68.2 78.2 84.9 88.6 90.2 90.7 90.6
US 61.6 61.1 62.1 70.6 83.2 92.6 97.4 100.7 103.5 106.4 109.7
27
Note: Yellow fields contain IMF estimates/ forecasts
Source: IMF WEO Database, April 2010
30. CASE Network Studies & Analyses No. 411 – The Global Financial Crisis and it’s Impact on …
Figure 3: GDP growth in 2009 (X-axis, in %) vs. GDP PPP per capita level (Y-axis, in
current international dollars), 2006
29
55000
50000
45000
40000
35000
30000
25000
20000
15000
10000
5000
0
-20.0 -18.0 -16.0 -14.0 -12.0 -10.0 -8.0 -6.0 -4.0 -2.0 0.0 2.0 4.0 6.0 8.0 10.0
Note: Data for 179 countries
Source: IMF WEO Database, April 2010
Figure 3a: GDP growth in 2009 (X-axis, in %) vs. GDP PPP per capita level (Y-axis, in
current international dollars), 2006, Europe and CIS
60000
50000
40000
30000
20000
10000
0
-20.0 -15.0 -10.0 -5.0 0.0 5.0 10.0
Note: Data for 49 countries European and CIS countries
Source: IMF WEO Database, April 2010
31. CASE Network Studies & Analyses No. 411 – The Global Financial Crisis and it’s Impact on …
Figure 4: GDP growth in 2009 (X-axis, in %) vs. exports-to-GDP ratio (Y-axis, in %) in
2006
30
120.0
100.0
80.0
60.0
40.0
20.0
0.0
-20.0 -18.0 -16.0 -14.0 -12.0 -10.0 -8.0 -6.0 -4.0 -2.0 0.0 2.0 4.0 6.0 8.0 10.0
Note: Data for 179 countries
Source: IMF WEO Database, April 2010; World Bank WDI Indicators, 2010
Figure 4a: GDP growth in 2009 (X-axis, in %) vs. exports-to-GDP ratio (Y-axis, in %) in
2006 in Europe and CIS
90.0
80.0
70.0
60.0
50.0
40.0
30.0
20.0
-20.0 -15.0 -10.0 -5.0 0.0 5.0 10.0
Note: Data for 48 European and CIS countries
Source: IMF WEO Database, April 2010; World Bank WDI Indicators, 2010
32. CASE Network Studies & Analyses No. 411 – The Global Financial Crisis and it’s Impact on …
Figure 5: GDP growth in 2009 (X-axis, in %) vs. domestic credit-to-GDP ratio (Y-axis, in
%) in 2006
31
270.0
240.0
210.0
180.0
150.0
120.0
90.0
60.0
30.0
0.0
-20.0 -18.0 -16.0 -14.0 -12.0 -10.0 -8.0 -6.0 -4.0 -2.0 0.0 2.0 4.0 6.0 8.0 10.0 12.0
Note: Data for 164 countries
Source: IMF WEO Database, April 2010; World Bank WDI Indicators, 2010
Figure 5a: GDP growth in 2009 (X-axis, in %) vs. domestic credit-to-GDP ratio (Y-axis,
in %) in 2006 in Europe and CIS
200.0
180.0
160.0
140.0
120.0
100.0
80.0
60.0
40.0
20.0
0.0
-20.0 -15.0 -10.0 -5.0 0.0 5.0 10.0
Note: Data for 46 European and CIS countries
Source: IMF WEO Database, April 2010; World Bank WDI Indicators, 2010
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Figure 6: GDP growth in 2009 (Y-axis, in %) vs. average money (M2) growth (X-axis, in
%) in 2001-2007
32
12.0
8.0
4.0
0.0
-4.0
-8.0
-12.0
-16.0
-20.0
0.0 10.0 20.0 30.0 40.0 50.0 60.0
Note: Data for 164 countries
Source: IMF WEO Database, April 2010
Figure 6a: GDP growth in 2009 (Y-axis, in %) vs. average money (M2) growth (X-axis, in
%), 2001-2007 in Europe and CIS
70.0
60.0
50.0
40.0
30.0
20.0
10.0
0.0
-20.0 -15.0 -10.0 -5.0 0.0 5.0 10.0
Note: Data for 37 European and CIS countries
Source: IMF WEO Database, April 2010
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Figure 7: Average current account balance in 2005-2007 (X-axis, in % of GDP) vs. GDP
growth in 2009 (Y-axis, in %)
-40 -30 -20 -10 0 10 20 30 40 50 60
-20.0 -15.0 -10.0 -5.0 0.0 5.0 10.0
33
12.0
8.0
4.0
0.0
-4.0
-8.0
-12.0
-16.0
-20.0
Note: Data for 181 countries
Source: IMF WEO Database, April 2010
Figure 7a: Average current account balance in 2005-2007 (X-axis, in % of GDP) vs.
GDP growth in 2009 (Y-axis, in %) in Europe and CIS
20.0
15.0
10.0
5.0
0.0
-5.0
-10.0
-15.0
-20.0
-25.0
-30.0
Note: Data for 50 European and CIS countries
Source: IMF WEO Database, April 2010
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Figure 8: Average GDP growth, 2003-7 (X-axis, in %) vs. growth in 2009 (Y-axis, in %)
34
12.0
8.0
4.0
0.0
-4.0
-8.0
-12.0
-16.0
-20.0
-4.0 0.0 4.0 8.0 12.0 16.0 20.0 24.0
Note: Data for 182 countries
Source: IMF WEO Database, April 2010
Figure 8a: Average GDP growth, 2003-7 (X-axis, in %) vs. growth in 2009 (Y-axis, in %),
Europe and CIS
10.0
5.0
0.0
-5.0
-10.0
-15.0
-20.0
0.0 3.0 6.0 9.0 12.0 15.0
Note: Data for 50 European and CIS countries
Source: IMF WEO Database, April 2010
36. CASE Network Studies & Analyses No. 411 – The Global Financial Crisis and it’s Impact on …
Figure 9: Euro area: long-term government bond yields (annualized in %), 1999-2010
35
9.0
8.0
7.0
6.0
5.0
4.0
3.0
2.0
M1 1999
M5 1999
M1 2000
M5 2000
M9 2000
M1 2001
M9 1999
M9 2001
M1 2002
M5 2002
M5 2001
M9 2002
M5 2003
M9 2003
M1 2004
M1 2003
M5 2004
M9 2004
M1 2005
M5 2005
M9 2005
M1 2006
M5 2006
M9 2006
M1 2007
M5 2007
M9 2007
M1 2008
M5 2008
M9 2008
M1 2009
M9 2009
M1 2010
M5 2010
M5 2009
Austria Belgium
Finland France
Germany Greece
Ireland Italy
Luxembourg Netherlands
Portugal Spain
Source: IMF IFS database