Trade and the Euro: Will they Make or Break Bulgaria and Romania? A Country-Risk Assessment

27 Pages Posted: 4 Mar 2007

See all articles by Magdalena Oeberseder

Magdalena Oeberseder

Vienna University of Economics and Business

Gerhard Fink

Dept of International Business and Trade

Peter R. Haiss

WU Vienna University of Economics and Business; UniCredit Bank Austria; IES Vienna - Institute for the International Education of Students

Wolfgang Rainer

Vienna University of Economics and Business

Date Written: February 28, 2007

Abstract

After severe economic crises in the mid-nineties Bulgaria and Romania managed to improve their economic performance in the last decade. Consequently, the two new EU members became attractive investment targets for foreign direct investment. However, these transition economies struggle with a high external debt stock and current account deficit that raise concern about the probability of a currency crisis. We examine weather the country risk of Bulgaria and Romania is strongly affected by an appreciating Euro. As the trade deficits are soaring and Bulgaria pegged its currency to the Euro more research in this field is appropriate. Therefore we apply the Fink (1993b, 1995) scoring model analyzing the country risk of Bulgaria and Romania over the 1990-2005 period and compare outcomes to the country risk of Hungary and the Euro Area. Taking into account the debt, trade and currency movements we conclude an increasing country risk for Bulgaria and Romania, as well as for the Euro zone for 2007-2009.

Keywords: country risk, currency crisis, sustainable growth

JEL Classification: O11, F3, F4

Suggested Citation

Oeberseder, Magdalena and Fink, Gerhard and Haiss, Peter R. and Rainer, Wolfgang, Trade and the Euro: Will they Make or Break Bulgaria and Romania? A Country-Risk Assessment (February 28, 2007). Available at SSRN: https://ssrn.com/abstract=966336 or http://dx.doi.org/10.2139/ssrn.966336

Magdalena Oeberseder (Contact Author)

Vienna University of Economics and Business ( email )

Welthandelsplatz 1
Vienna, Wien 1020
Austria

Gerhard Fink

Dept of International Business and Trade ( email )

Welthandelsplatz 1, Building D1
Wien, 1020
Austria
+43/1/313364331 (Phone)

Peter R. Haiss

WU Vienna University of Economics and Business ( email )

Institute for Production Management
Welthandelsplatz 1
Vienna, A-1020
Austria
++43-660 4848254 (Phone)
++43-50505 8944214 (Fax)

UniCredit Bank Austria ( email )

Rothschildplatz 1
Vienna, A-1020
Austria
++43-(0)50505 44214 (Phone)
++43-(0)50505 89 44214 (Fax)

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

IES Vienna - Institute for the International Education of Students

Johannesgasse 7
Vienna, A-1010
Austria

Wolfgang Rainer

Vienna University of Economics and Business ( email )

Welthandelsplatz 1
Vienna, Wien 1020
Austria

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