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Southeastern Europe: Financial Deepening, Foreign Banks and Sudden Stops in Capital Flows

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  • Adalbert Winkler

    ()
    (Frankfurt School of Finance & Management,)

Abstract

Over recent years, rapid financial deepening has been observed in Southeastern Europe. While originally welcomed as a sign of financial development spurring growth, macrofinancial stability concerns emerged as inflationary pressures rose and current account deficits came close to or surpassed double-digit levels. However, until autumn 2008, stability risks remained contained. Since then, Southeastern European countries appear to have been confronted with a sudden stop of capital flows, creating an Asian-crisis-like scenario. While this seems to vindicate warnings that financial deepening had taken an unsustainable course, the drying up of capital flows has largely been reflecting contagion from the financial turmoil in mature markets. Against this background, the most recent events indicate that the strategy of fostering financial development based on fit and proper foreign banks does not automatically provide a guarantee for financial stability.

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Bibliographic Info

Article provided by Oesterreichische Nationalbank (Austrian Central Bank) in its journal Focus on European Economic Integration.

Volume (Year): (2009)
Issue (Month): 1 ()
Pages:

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Handle: RePEc:onb:oenbfi:y:2009:i:1:b:4

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Cited by:
  1. Danica Unevska Andonova & Branimir Jovanovic, 2011. "Sustainability of the Macedonian Current Account," Working Papers 2011-06, National Bank of the Republic of Macedonia.
  2. Adalbert Winkler, 2010. "The Financial Crisis: A Wake-Up Call for Strengthening Regional Monitoring of Financial Markets and Regional Coordination of Financial Sector Policies?," Working Papers id:3021, eSocialSciences.
  3. Vogel, Ursula & Winkler, Adalbert, 2010. "Foreign banks and financial stability in emerging markets: Evidence from the global financial crisis," Frankfurt School - Working Paper Series 149, Frankfurt School of Finance and Management.
  4. Gedeon Shirley, 2010. "The Political Economy of Currency Boards: Case of Bosnia and Herzegovina," South East European Journal of Economics and Business, De Gruyter Open, vol. 5(2), pages 7-20, November.
  5. Đorđe Đukić & Mališa Đukić, 2009. "The Global Financial Crisis and the Behaviour of Short-Term Interest Rates International and Serbian Aspects," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 56(4), pages 491-506, December.
  6. Nenovski, Tome, 2012. "Lessons from world economic crises: cleaning, remodeling and harmonizing the economy," MPRA Paper 42249, University Library of Munich, Germany.
  7. Nenovski, Tome, 2012. "Post crisis Remodeling of the Economy for the Sustainable Growth of South Eastern European Countries," MPRA Paper 42257, University Library of Munich, Germany.

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