Vulnerabilities in Emerging Southeastern Europe - How Much Cause for Concern?

Sorsa, Piritta; Bakker, Bas; Duenwald, Christoph; Maechler, Andréa M.; Tiffin, Andrew

doi:10.2139/ssrn.1087155

Cited by 20 publications

(5 citation statements)

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“…For example,Bakker and Vladkova-Hollar (2006) argued that vulnerabilities in Eastern Europe looked worse than in pre-crisis Asia. A similar view could be found in Roubini andMenegatti (2006), andSorsa et. al (2007) Duenwald, Gueorguiev and Schaechter (2005).…”

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confidence: 89%

The Credit Boom in the EU New Member States: Bad Luck or Bad Policies?

Fund¹

2010

IMF Working Papers

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This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate.In the past decade, most of the EU New Member States experienced a severe credit-boom bust cycle. This paper argues that the credit boom-bust cycle was to a large extent the result of factors external to the region ("bad luck"). Rapid credit growth followed from a high liquidity in global markets and the particular attractiveness of "new Europe" for capital flows, while the end of the credit cycle was brought about by a global crisis. However, the fact that some countries managed to avoid most of the excesses, including asset price bubbles and foreign exchange lending, suggests that policies and policy failures ("bad policies")-in particular overly expansionary macroeconomic settings and excessively optimistic views on prudential risks-also have played a critical role.

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confidence: 89%

The Credit Boom in the EU New Member States: Bad Luck or Bad Policies?

Fund¹

2010

IMF Working Papers

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“…13 In terms of public investment, Southeastern Europe and CIS countries spend considerably more as a share of GDP, although this may be explained by the need to catch up in infrastructure, as suggested by the related EBRD indicator in The stock of domestic bank private sector credit as a share of GDP is still small in most economies in the region relative to income levels and even more so compared with what seen in the euro area (Figure 5). However, these ratios do n include lending by nonbank financial institutions, which has been rising rapidly in emerging Europe, although from a low basis, and direct borrowing from corporates and, increasingly, households abroad (evidence for Southeastern Europe in Sorsa, Bakker, Duenwald, Maechler, and Tiffin (2007) suggests a much larger stock of credit when these sources are included). Moreover, the recent speed of financia deepening in the region may have been extreme (Figure 6).…”

Section: Determinants Of Economic Growthmentioning

confidence: 99%

Convergence in Emerging Europe: Sustainability and Vulnerabilities

Vamvakidis

2008

IMF Working Papers

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This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate.The emerging European economies have been converging rapidly towards the more advanced European economies in recent years. However, large external imbalances in parts of the region have raised questions about sustainability and concerns about vulnerabilities. Empirical evidence in this paper suggest that the convergence trend of emerging Europe is based on strong fundamentals and is expected to continue, but at a slower pace. Moreover, the convergence path may be volatile as countries with large external imbalances adjust, with risks of a hard landing in some cases.

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“…Sorsa et al (2007) identified expectations of appreciation driven in part by capital inflows as a driver of liability dollarization in Southeastern European countries. A similar phenomenon appears to have occurred in Turkey during the build-up to the crisis of 2000-01(IMF 2004); and in Iceland before the Global Financial Crisis (IMF 2012b).6 The balance of payments records the trade in assets between resident and non-resident entities.…”

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confidence: 99%