The Real Effect of Financial Crises in the European Transition Economies

GATE (Groupe d’Analyse et de Théorie Économique) Working Paper No. 09-20

34 Pages Posted: 29 Nov 2009 Last revised: 11 May 2010

See all articles by Davide Furceri

Davide Furceri

University of Palermo; Organization for Economic Co-Operation and Development (OECD)

Aleksandra Zdzienicka

International Monetary Fund (IMF)

Date Written: November 1, 2009

Abstract

The aim of this work is to assess the impact of financial crises on output for 11 European transition economies (CEECs). The results suggest that financial crises have a significant and permanent effect, lowering long-term output by about 17 percent. The effect is more important in smaller countries, with relative higher dependence on external financing, and in which the banking sector noticed more important financial disequilibria. We also found that fiscal policy measures have been the most efficient tools in dealing with the crises, while the role of monetary policy instruments has been rather blinded. Exchange rate resulted to be more a propagator than a crises absorber, while the IMF credit has been found to have positive (but not significant) impact on growth performance. Finally, the effect for the CEECs is much bigger than in the EU advanced economies, for which we found that financial crises lowers long-term output only by 2 percent.

Keywords: Output Growth, Financial Crisis, CEECs

JEL Classification: G1, E6

Suggested Citation

Furceri, Davide and Zdzienicka, Aleksandra, The Real Effect of Financial Crises in the European Transition Economies (November 1, 2009). GATE (Groupe d’Analyse et de Théorie Économique) Working Paper No. 09-20, Available at SSRN: https://ssrn.com/abstract=1513305 or http://dx.doi.org/10.2139/ssrn.1513305

Davide Furceri (Contact Author)

University of Palermo ( email )

Viale delle Scienza
Palermo, Palermo 90128
Italy

Organization for Economic Co-Operation and Development (OECD) ( email )

2 rue Andre Pascal
Paris Cedex 16, 75775
France

Aleksandra Zdzienicka

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Do you have negative results from your research you’d like to share?

Paper statistics

Downloads
96
Abstract Views
663
Rank
492,371
PlumX Metrics