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Exchange Rate Policy and Economic Growth after the Financial Crisis in Central and Eastern Europe

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  • Zsolt Darvas

Abstract

In a paper on the effects of the global financial crisis in Central and Eastern Europe (CEE), the author reacts to a paper of Aslund (2011) published in the same issue of "Eurasian Geography and Economics" on the influence of exchange rate policies on the region’s recovery. The author argues that post-crisis corrections in current account deficits in CEE countries do not in themselves signal a return to steady economic growth. Disagreeing with Aslund over the role of loose monetary policy in fostering the region’s economic problems, he outlines a number of competitiveness problems that remain to be addressed in the 10 new EU member states of CEE, along with improvements in framework conditions supporting future macroeconomic growth.

Suggested Citation

  • Zsolt Darvas, 2011. "Exchange Rate Policy and Economic Growth after the Financial Crisis in Central and Eastern Europe," Working Papers 1103, Department of Mathematical Economics and Economic Analysis, Corvinus University of Budapest.
    • Handle: RePEc:mkg:wpaper:1103
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    File URL: http://web.uni-corvinus.hu/matkg/working_papers/wp_2011_3_darvas.pdf
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    References listed on IDEAS

    as
    1. Jean Pisani-Ferry & Pavle Petrovic & Michael A Landesmann & Vladimir Gligorov & Daniel Daianu & Torbjörn Becker & Zsolt Darvas & André Sapir & Beatrice Weder di Mauro, . "Whither growth in central and eastern Europe? Policy lessons for an integrated Europe," Blueprints, Bruegel, number 453, December.
    2. Zsolt Darvas, 2010. "The case for reforming euro area entry criteria," Society and Economy, Akadémiai Kiadó, Hungary, vol. 32(2), pages 195-219, December.
    3. Zsolt Darvas, 2011. "Beyond the Crisis: Prospects for Emerging Europe," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 53(2), pages 261-290, June.
    4. Jan in 't Veld & Janos Varga, 2010. "The Potential Impact of EU Cohesion Policy Spending in the 2007-13 Programming Period: A Model-Based," European Economy - Economic Papers 2008 - 2015 422, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
    5. Zsolt Darvas, 2010. "The Impact of the Crisis on Budget Policy in Central and Eastern Europe," OECD Journal on Budgeting, OECD Publishing, vol. 10(1), pages 1-42.
    6. Tamim Bayoumi & Jaewoo Lee & Sarma Jayanthi, 2006. "New Rates from New Weights," IMF Staff Papers, Palgrave Macmillan, vol. 53(2), pages 1-4.
    7. Gabor Hunya & Monika Schwarzhappel, 2010. "FDI in the CEECs Hit Hard by the Global Crisis," wiiw FDI Reports 2010-05, The Vienna Institute for International Economic Studies, wiiw.
    8. World Bank, 2011. "World Development Indicators 2011," World Bank Publications - Books, The World Bank Group, number 2315, December.
    9. Zsolt Darvas, 2009. "The EU's Role in Supporting Crisis-Hit Countries in Central and Eastern Europe," Policy Contributions 368, Bruegel.
    10. Alan Ahearne & Juan Delgado & Jakob von Weizsäcker, 2008. "A tail of two countries," Policy Briefs 6, Bruegel.
    11. Zsolt Darvas, 2009. "The Baltic Challenge and Euro-Area Entry," Policy Contributions 357, Bruegel.
    12. Abdul Abiad & Daniel Leigh & Ashoka Mody, 2009. "Financial integration, capital mobility, and income convergence [Unbundling institution]," Economic Policy, CEPR, CESifo, Sciences Po;CES;MSH, vol. 24(58), pages 241-305.
    13. World Bank, 2010. "World Development Indicators 2010," World Bank Publications - Books, The World Bank Group, number 4373, December.
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    Citations

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    Cited by:

    1. Zsombor Z. Méder & András Simonovits & János Vinczeb, 2012. "Tax Morale and Tax Evasion: Social Preferences and Bounded Rationality," Economic Analysis and Policy, Elsevier, vol. 42(2), pages 171-188, September.
    2. Zsolt Darvas, 2013. "The Euro Area's Tightrope Walk: Debt and Competitiveness in Italy and Spain," Working Papers 1307, Department of Mathematical Economics and Economic Analysis, Corvinus University of Budapest.
    3. Darvas, Zsolt, 2015. "Does money matter in the euro area? Evidence from a new Divisia index," Economics Letters, Elsevier, vol. 133(C), pages 123-126.
    4. Peter Mihalyi, 2012. "The Causes of Slow Growth in Hungary during the Post-Communist Transformation Period," CERS-IE WORKING PAPERS 1216, Institute of Economics, Centre for Economic and Regional Studies.
    5. Jozsef Moczar, 2016. "Noether's Theorem and the Lie Symmetries of Goodwin-model," Working Papers 1601, Department of Mathematical Economics and Economic Analysis, Corvinus University of Budapest.
    6. Zsótér Brigitta & Illés Sándor & Simonyi Péter, 2020. "Model of Local Economic Development in Hungarian Countryside," European Countryside, Sciendo, vol. 12(1), pages 85-98, March.

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    More about this item

    Keywords

    Central and Eastern Europe; Baltic states; exchange rate policy; global financial crisis; floating exchange rate; fixed exchange rate; inflation; internal devaluation; credit boom; overheating economy; current account balance; negative output gap; euro area; unit labour costs; price competitiveness;
    All these keywords.

    JEL classification:

    • F30 - International Economics - - International Finance - - - General
    • F40 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - General
    • F50 - International Economics - - International Relations, National Security, and International Political Economy - - - General
    • P26 - Political Economy and Comparative Economic Systems - - Socialist and Transition Economies - - - Property Rights

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