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Economic Fluctuations in Central and Eastern Europe: The Facts

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  • Benczúr, Péter
  • Rátfai, Attila

Abstract

We carry out a detailed analysis of quarterly frequency dynamics in macroeconomic aggregates in twelve countries of Central and Eastern Europe. The facts we document include the variability and persistence in and the co-movement among output, and other major real and nominal variables. We find that consumption is highly volatile and government spending is procyclical. Gross fixed capital formation is highly volatile. Net exports are countercyclical. Imports are procyclical, much more than exports. Exports are most procyclical and persistent in open countries. Labour market variables are all highly volatile. Employment is lagging, and often procyclical. Real wages are dominantly procyclical. Productivity is dominantly procyclical and coincidental. Private credit is procyclical and dominantly lagging the cycle. The CPI is countercyclical, and is weakly leading or coincidental. The cyclicality of inflation is unclear, but its relative volatility is low. Net capital flows are mostly leading and procyclical and exhibit low persistence. Nominal interest rates are in general smooth and persistent. The nominal exchange rate is more persistent than the real one. Overall, we find that fluctuations in CEE countries are larger than in industrial countries, and are of similar size than in other emerging economies. This is particularly true about private consumption. The co-movement of variables, however, shows a large degree of similarity. A notable exception is government spending: unlike in industrial economies, it is rather procyclical in transition economies. The findings also indicate that Croatia and the accession group show broadly similar cyclical behaviour to industrial countries. The most frequent country outliers are Bulgaria, Romania and Russia, especially in labour market, price and exchange rate variables. Excluding these countries from the sample makes many of the observed patterns in cyclical dynamics quite homogenous.

Suggested Citation

  • Benczúr, Péter & Rátfai, Attila, 2005. "Economic Fluctuations in Central and Eastern Europe: The Facts," CEPR Discussion Papers 4846, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:4846
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    Cited by:

    1. Vasilev, Aleksandar, 2009. "Business cycles in Bulgaria and the Baltic countries: an RBC approach," EconStor Open Access Articles, ZBW - German National Library of Economics, pages 148-170.
    2. Mariarosaria Comunale, 2017. "Synchronicity of real and financial cycles and structural characteristics in EU countries," CEIS Research Paper 414, Tor Vergata University, CEIS, revised 25 Sep 2017.
    3. Maria Neycheva, 2005. "The Impact of the Fisc on Macroeconomic Fluctuations in Bulgarian Economy," Economic Thought journal, Bulgarian Academy of Sciences - Economic Research Institute, issue 3, pages 42-59.
    4. Macchiarelli, Corrado, 2013. "Similar GDP-inflation cycles. An application to CEE countries and the euro area," Research in International Business and Finance, Elsevier, vol. 27(1), pages 124-144.
    5. Tanja Broz, 2008. "The Introduction of the Euro in Central and Eastern European Countries - Is it Economically Justifiable?," Working Papers 0801, The Institute of Economics, Zagreb.
    6. Caraiani, Petre, 2012. "Stylized facts of business cycles in a transition economy in time and frequency," Economic Modelling, Elsevier, vol. 29(6), pages 2163-2173.
    7. Miguel Santos, 2016. "The Right Fit for the Wrong Reasons: Real Business Cycle in an Oil-dependent Economy," Latin American Journal of Economics-formerly Cuadernos de Economía, Instituto de Economía. Pontificia Universidad Católica de Chile., vol. 53(1), pages 61-94, December.
    8. Sandrine Levasseur, 2008. "Updating empirical evidence on business cycles synchronization between CEECs and the euro area : How important is the recent period," Documents de Travail de l'OFCE 2008-11, Observatoire Francais des Conjonctures Economiques (OFCE).
    9. Katarzyna Rosiak-Lada, 2008. "Stylized Facts of Macroeconomics: the Polish Experience," Ekonomia journal, Faculty of Economic Sciences, University of Warsaw, vol. 20.
    10. Ciprian Chirilă & Viorica Chirilă, 2012. "Unemployment And Business Cycles In Central And Eastern European Countries," Anale. Seria Stiinte Economice. Timisoara, Faculty of Economics, Tibiscus University in Timisoara, vol. 0, pages 486-493, November.
    11. Sandrine Levasseur, 2008. "Updating empirical evidence on business cycles synchronization between CEECs and euro area : how important is the recent period," Sciences Po publications 2008-11, Sciences Po.
    12. Shaig Adigozalov & Vugar Rahimov, 2015. "Institutional Quality, Cyclicality of Macroeconomic Policies and the Effects of Macroeconomic Shocks: Evidence from Transition Economies," IHEID Working Papers 23-2015, Economics Section, The Graduate Institute of International Studies.
    13. Slavov, Slavi T., 2008. "Measuring and modeling the effects of G-3 exchange rate fluctuations on small open economies: A natural experiment," Economic Systems, Elsevier, vol. 32(3), pages 253-273, September.
    14. Alina Barnett, 2007. "The effects of EU shocks on the newly acceded countries," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 12(4), pages 389-404.

    More about this item

    Keywords

    business cycle facts; Central and Eastern Europe;

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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