Download This PaperForeign and Domestic Growth Drivers in Eastern Europe
20 Pages Posted: 25 Nov 2010
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Foreign and Domestic Growth Drivers in Eastern Europe
Foreign and Domestic Growth Drivers in Eastern Europe
Date Written: July 1, 2010
Abstract
This paper analyses the growth effects of capital formation, exports and FDI as major drivers of economic development in Eastern Europe. The fundamental innovations are identified by empirically and theoretically motivated short- and long-run restrictions in structural cointegrated vector autoregressions. Impulse responses and variance decompositions reveal quite different growth effects in various Eastern European countries. Generally, strong reliance on exports goes along with higher GDP, and FDI bears substantial potential for fostering economic growth. It is shown that the recent worldwide recession clearly hit Eastern Europe through the export channel, whereas the recovery is mainly supported by positive demand shocks.
Keywords: Eastern Europe, Growth, Exports, Investment, Identification
JEL Classification: O11, C32
Suggested Citation: Suggested Citation
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