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Macroeconomic and financial stability challenges for acceding and candidate countries

  • Adalbert Winkler
  • Roland Beck

This paper – based on a report by a Task Force established by the International Relations Committee (IRC) of the European System of Central Banks (ESCB) – reviews macroeconomic and financial stability challenges for acceding (Bulgaria and Romania) and candidate countries (Croatia and Turkey). In an environment characterised by strong growth and capital inflows, the main macroeconomic challenges relate to the recent pick-up of inflation and the large and widening current account deficits. Moreover, rapid credit growth has been a recent feature of financial development in all countries and thus constitutes the main financial stability challenge. In general, monetary authorities have responded to these challenges by tightening monetary conditions and prudential standards, with concrete measures also reflecting the different monetary and exchange rate regimes in the region. The paper also highlights four specific features of financial development in the countries under review, namely the dominance of banks in financial intermediation, the strong participation of foreign-owned banks, the widespread use of foreign currencies and the strengthening of supervisory frameworks. JEL Classification: E65, G21, G38, O16, P27.

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File URL: http://www.ecb.europa.eu/pub/pdf/scpops/ecbocp48.pdf
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Paper provided by European Central Bank in its series Occasional Paper Series with number 48.

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Length: 85 pages
Date of creation: Jul 2006
Date of revision:
Handle: RePEc:ecb:ecbops:20060048
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  1. Francesco Paolo Mongelli & Ettore Dorrucci & Itai Agur, 2005. "What does European institutional integration tell us about trade integration?," Occasional Paper Series 40, European Central Bank.
  2. Claus Brand & Dieter Gerdesmeier & Barbara Roffia, 2002. "Estimating the trend of M3 income velocity underlying the reference value for monetary growth," Occasional Paper Series 03, European Central Bank.
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  13. ., 2004. "Market dynamics associated with credit ratings: a literature review," Financial Stability Review, Banque de France, issue 4, pages 77-93, June.
  14. Angela Maddaloni & Darren Pain, 2004. "Corporate ‘excesses’ and financial market dynamics," Occasional Paper Series 17, European Central Bank.
  15. Francesco Mazzaferro & Arnaud Mehl & Michael Sturm & Christian Thimann & Adalbert Winkler, 2002. "Economic relations with regions neighbouring the euro area in the ‘euro time zone," Occasional Paper Series 07, European Central Bank.
  16. Michael Sturm & Nikolaus Siegfried, 2005. "Regional monetary integration in the member states of the Gulf Cooperation Council," Occasional Paper Series 31, European Central Bank.
  17. Andrea Enria & Lorenzo Cappiello & Frank Dierick & Sergio Grittini & Andrew Haralambous & Angela Maddaloni & Philippe Molitor & Fatima Pires & Paolo Poloni, 2004. "Fair value accounting and financial stability," Occasional Paper Series 13, European Central Bank.
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