The Second Transition: Eastern Europe in Perspective

35 Pages Posted: 23 Mar 2009

See all articles by Ashoka Mody

Ashoka Mody

International Monetary Fund (IMF) - Research Department

Daniel Leigh

International Monetary Fund (IMF)

S. Fabrizio

International Monetary Fund (IMF)

Date Written: March 2009

Abstract

The countries of Eastern Europe achieved two remarkable transitions in the short period of the last two decades: from plan to market and, then, in the run-up to and entry into the European Union, they rode a wave of global trade and financial market integration. Focusing on the second transition, this paper reaches three conclusions. First, by several metrics, East European and East Asian growth performances were about on par from the mid-1990s; both regions far surpassed Latin American growth. Second, the mechanisms of growth in East Europe and East Asia were, however, very different. East Europe relied on a distinctive - often discredited-model, embracing financial integration with structural change to compensate for appreciating real exchange rates. In contrast, East Asia contained further financial integration and maintained steady or depreciating real exchange rates. Third, the ongoing financial turbulence has, thus far, not had an obviously differential impact on emerging market regions: rather, the hot spots in each region reflect individual country vulnerabilities. If the East European growth model is distinctive, is it sustainable and replicable? The paper speculates on the possibilities.

Keywords: Working Papers

Suggested Citation

Mody, Ashoka and Leigh, Daniel and Fabrizio, Stefania, The Second Transition: Eastern Europe in Perspective (March 2009). IMF Working Papers, Vol. , pp. 1-33, 2009. Available at SSRN: https://ssrn.com/abstract=1366173

Ashoka Mody (Contact Author)

International Monetary Fund (IMF) - Research Department ( email )

700 19th Street NW
Washington, DC 20431
United States
202-623-9617 (Phone)
202-589-9617 (Fax)

HOME PAGE: http://www.amody.com

Daniel Leigh

International Monetary Fund (IMF) ( email )

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

Stefania Fabrizio

International Monetary Fund (IMF) ( email )

700 19th Street NW
Washington, DC 20431
United States

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