Macroeconomic and Financial Stability Challenges for Acceding and Candidate Countries

87 Pages Posted: 10 Jul 2006

See all articles by Adalbert Winkler

Adalbert Winkler

Frankfurt School of Finance & Management

Roland Beck

European Central Bank (ECB)

Date Written: July 2005

Abstract

This paper - based on a report by a Task Force established by the International Relations Committee (IRC) of the European System of Central Banks (ESCB) - reviews macroeconomic and financial stability challenges for acceding (Bulgaria and Romania) and candidate countries (Croatia and Turkey). In an environment characterised by strong growth and capital inflows, the main macroeconomic challenges relate to the recent pick-up of inflation and the large and widening current account deficits. Moreover, rapid credit growth has been a recent feature of financial development in all countries and thus constitutes the main financial stability challenge. In general, monetary authorities have responded to these challenges by tightening monetary conditions and prudential standards, with concrete measures also reflecting the different monetary and exchange rate regimes in the region. The paper also highlights four specific features of financial development in the countries under review, namely the dominance of banks in financial intermediation, the strong participation of foreign-owned banks, the widespread use of foreign currencies and the strengthening of supervisory frameworks.

Keywords: South-East Europe, macroeconomic performance, credit growth, financial stability

JEL Classification: E65, G21, G38, O16, P27

Suggested Citation

Winkler, Adalbert and Beck, Roland, Macroeconomic and Financial Stability Challenges for Acceding and Candidate Countries (July 2005). ECB Occasional Paper No. 48, Available at SSRN: https://ssrn.com/abstract=807425 or http://dx.doi.org/10.2139/ssrn.807425

Adalbert Winkler (Contact Author)

Frankfurt School of Finance & Management ( email )

Adickesallee 32-34
Frankfurt am Main, 60322
Germany

Roland Beck

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

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