The Real Economy after Episodes of Financial Crises in Central and Eastern Europe (original) (raw)
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This paper uses a Markov regime-switching model to assess the vulnerability of a series of Central and Eastern European countries (ie Czech Republic, Hungary, Slovak Republic) and two CIS countries (ie, Russia and Ukraine) during the period 1993-2004. For the new EU member states in Central and Eastern Europe, the results of our model show that the majority of crises in those countries can be explained by inconsistencies in the domestic policy mix and by the deterioration of macroeconomic fundamentals, as emphasised by first-generation crises models, while for the CIS countries analysed, financial vulnerability type indicators were the most relevant, that is, indicators connected with the second-and third-generation of crisis model better explain the vulnerability of these countries. Additionally, the set of indicators chosen by our model is rather heterogeneous, supporting the superiority of a country-by-country approach.
2011
The 2008 crisis shows that the dominant economies were not as dominant as they thought" says Dominique Strauss-Kahn, the French former head of the IMF (The Economist, vol. 401, no 8759, 2011). By extension, we can say that Central and Eastern Europe countries were not as weak as we could think. Such a conclusion has been reached by the authors of the volume "Financial Crisis in Central and Eastern Europe: From Similarity to Diversity", co-edited by Grzegorz Gorzelak, Chor-Ching Goh. The book is the result of an international seminar organized in September 2009 by the Centre for European Regional and Local Studies, University of Warsaw (EUROREG) and the World Bank and gathers different contributions of outstanding experts from new and old Europe, providing a distinctive perspective on the current economic and financial crisis. The book includes three sections covering 19 chapters. In the first section, four authors, W.Orlawski, M.Lennert, I.Gill and B.Quillin, provide a general view on the crisis, its main causes and evolutions. Orlawski (p.10-15) identifies 10 factors which led to the current crisis, from robust changes in the distribution of the global economic and financial power, globalization process, demographic changes, development of derivatives market, development of the whole financial market, inability to correctly assess the risk connected with investment in various financial instruments, the wave of "irrational exuberance", recklessness of financial institutions, serious financial institutions management errors and fatal errors of the economic policy, all of them located first in the USA. He concluded that "the combination of the 10 factors proved to be deadly for the global finance" and that "only a serious, coordinated effort on a global scale may secure that the crisis of 2008-2009 does not recur in the years to come". At the moment of writing this book review (November 2011), the euro zone found itself in a very difficult and complicated situation, revealing that coordinated efforts are still waiting to be carried out. Lennert (p.17-25) tried to find some patterns in the crisis' evolution, a crisis which he considers to be a structural one. According to