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Do Economists' and Financial Markets' Perspectives on the New Members of the EU Differ?

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Author Info

  • Susan Schadler
  • Pipat Luengnaruemitchai

Abstract

In the past several years, the ten new Central and Eastern European members of the European Union have enjoyed rapid growth but frequently alongside growing external imbalances. Economists have pointed to rising vulnerabilities, but markets compressed sovereign bond yields. This paper examines the evidence from the perspective of economists' vulnerability analysis and markets' pricing of sovereign bonds. It finds that spread are lower than can be explained by 'fundamentals' and speculates on the causes and permanence of this yield compression.

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Bibliographic Info

Paper provided by International Monetary Fund in its series IMF Working Papers with number 07/65.

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Length: 36
Date of creation: 01 Mar 2007
Date of revision:
Handle: RePEc:imf:imfwpa:07/65

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Related research

Keywords: Emerging markets; European Union; Economic growth; Bonds; Prices;

This paper has been announced in the following NEP Reports:

References

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  1. Martín González-Rozada & EduardoLevy Yeyati, 2008. "Global Factors and Emerging Market Spreads," Economic Journal, Royal Economic Society, vol. 118(533), pages 1917-1936, November.
  2. Peter C.B. Phillips & Hyungsik R. Moon, 1999. "Linear Regression Limit Theory for Nonstationary Panel Data," Cowles Foundation Discussion Papers 1222, Cowles Foundation for Research in Economics, Yale University.
  3. Peter Pedroni, 2004. "Panel Cointegration: Asymptotic and Finite Sample Properties of Pooled Time Series Tests with an Application to the PPP Hypothesis," Department of Economics Working Papers 2004-15, Department of Economics, Williams College.
  4. Manmohan S. Kumar & Jirí Jonáš & David Hauner, 2007. "Policy Credibility and Sovereign Credit-The Case of New EU Member States," IMF Working Papers 07/1, International Monetary Fund.
  5. Pedroni, Peter, 2004. "Panel Cointegration: Asymptotic And Finite Sample Properties Of Pooled Time Series Tests With An Application To The Ppp Hypothesis," Econometric Theory, Cambridge University Press, vol. 20(03), pages 597-625, June.
  6. Barry Eichengreen & Ashoka Mody, 2000. "What Explains Changing Spreads on Emerging Market Debt?," NBER Chapters, in: Capital Flows and the Emerging Economies: Theory, Evidence, and Controversies, pages 107-136 National Bureau of Economic Research, Inc.
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Citations

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Cited by:
  1. Marcin, Piatkowski, 2009. "The Coming Golden Age of New Europe," MPRA Paper 19523, University Library of Munich, Germany.
  2. Julia Lendvai & Werner Roeger, 2010. "External deficits in the Baltics 1995 to 2007: Catching up or imbalances," European Economy - Economic Papers 398, Directorate General Economic and Monetary Affairs (DG ECFIN), European Commission.
  3. D B�ttner & B. Hayo, 2012. "EMU-related news and financial markets in the Czech Republic, Hungary and Poland," Applied Economics, Taylor and Francis Journals, vol. 44(31), pages 4037-4053, November.
  4. Martin Èihák & Srobona Mitra, 2009. "The Financial Crisis and European Emerging Economies," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 59(6), pages 541-553, December.
  5. Fabio Comelli, 2012. "Emerging Market Sovereign Bond Spreads: Estimation and Back-testing," IMF Working Papers 12/212, International Monetary Fund.
  6. Martin Cihák & Wim Fonteyne, 2009. "Five Years After: European Union Membership and Macro-Financial Stability in the New Member States," IMF Working Papers 09/68, International Monetary Fund.
  7. Regling, Klaus & Deroose, Servaas & Felke, Reinhard & Kutos, Paul, 2010. "The Euro After Its First Decade: Weathering the Financial Storm and Enlarging the Euro Area," ADBI Working Papers 205, Asian Development Bank Institute.
  8. Sabine Herrmann & Adalbert Winkler, 2009. "Financial markets and the current account: emerging Europe versus emerging Asia," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 145(3), pages 531-550, October.
  9. Sabine Herrmann & Adalbert Winkler, 2009. "Real convergence, financial markets, and the current account - Emerging Europe versus emerging Asia," European Economy - Economic Papers 362, Directorate General Economic and Monetary Affairs (DG ECFIN), European Commission.
  10. Dabrowski, Marek, 2010. "The global financial crisis: Lessons for European integration," Economic Systems, Elsevier, vol. 34(1), pages 38-54, March.
  11. Klaus Regling & Servaas Deroose & Reinhard Felke & Paul Kutos, 2010. "The Euro After Its First Decade : Weathering the Financial Storm and Enlarging the Euro Area," Governance Working Papers 22817, East Asian Bureau of Economic Research.
  12. International Monetary Fund, 2007. "Vulnerabilities in Emerging Southeastern Europe-How Much Cause for Concern?," IMF Working Papers 07/236, International Monetary Fund.
  13. Stefania Fabrizio & Daniel Leigh & Ashoka Mody, 2009. "The second transition: Eastern Europe in perspective," European Economy - Economic Papers 366, Directorate General Economic and Monetary Affairs (DG ECFIN), European Commission.

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