Europe as a Convergence Engine-Heterogeneity and Investment Opportunities in Emerging Europe

Abstract

The Policy Research Working Paper Series disseminates the findings of work in progress to encourage the exchange of ideas about development issues. An objective of the series is to get the findings out quickly, even if the presentations are less than fully polished. The papers carry the names of the authors and should be cited accordingly. The findings, interpretations, and conclusions expressed in this paper are entirely those of the authors. They do not necessarily represent the views of the International Bank for Reconstruction and Development/World Bank and its affiliated organizations, or those of the Executive Directors of the World Bank or the governments they represent.

Financial Integration in Emerging Europe: An Enviable Development Opportunity with Tail Risks

“…*, **, and *** denote statistical significance at the 10 percent, 5 percent, and 1 percent levels, respectively. Source: Stojkov and Zalduendo (2011).…”

“…Indeed, large external imbalances in some emerging European countries before the crisis made them particularly vulnerable. However, Stojkov and Zalduendo (2011) show the foreign savings-growth link remains valid even when periods of excessive growth-and excessive vulnerability-are excluded from the analysis.…”

“…Similarly, Gourinchas and Jeanne (2009) To draw lessons from emerging Europe's financial integration experience and its links to growth, it is therefore necessary to understand the role of foreign savings as a composite measure of the net foreign capital flowing into a country. Stojkov and Zalduendo (2011) …”

“…A well-developed financial system provides an efficient intermediary for foreign funds, enabling a smoothing of consumption and investment. 6 Stojkov and Zalduendo (2011) assume that financial system needs to reach certain threshold of development to achieve a foreign savings-growth link; they also experiment with alternative threshold measures.…”

Developmental perspectives on Europe

“…It was customary to attribute next to miraculous features to the accession to the European Union. EU membership was seen basically as a growth engine (Stojkov -Zaldueno 2011) leading to by and large unconditional convergence on the ground, not just in models.…”