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The Real Effect of Financial Crises in the European Transition EconomiesDavide FurceriOrganization for Economic Co-Operation and Development (OECD); University of Palermo - Istituto di Economia Politica Aleksandra ZdzienickaUniversity of Lyon 2 - Groupe d'Analyse et de Théorie Economique (GATE) November 1, 2009 GATE (Groupe d’Analyse et de Théorie Économique) Working Paper No. 09-20 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.
Number of Pages in PDF File: 34 Keywords: Output Growth, Financial Crisis, CEECs JEL Classification: G1, E6 working papers seriesDate posted: November 29, 2009 ; Last revised: May 11, 2010Suggested CitationContact Information
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