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The impact of the global financial turmoil and recession on Mediterranean countries’ economies

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  • Sturm, Michael
  • Sauter, Nicolas

Abstract

This paper reviews the impact of the global financial turmoil and the subsequent recession on the economies of southern and eastern Mediterranean countries. The major effects on the economies of this region have come through transmission channels associated with the real economy, i.e. the global recession. These are, in particular, declines in exports, oil revenues, tourism receipts, remittances and foreign direct investment (FDI) inflows, with the drop in exports so far appearing to have had the strongest impact. As a result, real GDP growth has weakened in the wake of the global crisis. However, the weakening of economic activity in the Mediterranean region has been less pronounced than in advanced economies and most other emerging market regions. The main reason for this is that the direct impact of the global financial turmoil on banking sectors and financial markets in Mediterranean countries has been relatively limited. This is mainly due to (i) their lack of exposure to US mortgage-related assets that turned “toxic”, a feature the region shares with other emerging markets, and (ii) the limited financial development of many countries in the region and their limited integration into global financial markets, a feature that distinguishes the region from other emerging markets and, in particular, from the euro area’s neighbours to the east. Notwithstanding the relative resilience of southern and eastern Mediterranean countries in the wake of the global crisis, the region faces significant challenges. In particular, many countries need significantly higher growth rates to address the employment challenge posed as a consequence of demographic developments. JEL Classification: C43, C51, D91

Suggested Citation

  • Sturm, Michael & Sauter, Nicolas, 2010. "The impact of the global financial turmoil and recession on Mediterranean countries’ economies," Occasional Paper Series 118, European Central Bank.
  • Handle: RePEc:ecb:ecbops:20100118
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    File URL: http://www.ecb.europa.eu/pub/pdf/scpops/ecbocp118.pdf
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    References listed on IDEAS

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    1. Matthieu Bussière & Emilia Pérez‐Barreiro & Roland Straub & Daria Taglioni, 2011. "Protectionist Responses to the Crisis: Global Trends and Implications," The World Economy, Wiley Blackwell, vol. 34, pages 826-852, May.
    2. Stolz, Stéphanie Marie & Wedow, Michael, 2010. "Extraordinary measures in extraordinary times – Public measures in support of the financial sector in the EU and the United States," Occasional Paper Series 117, European Central Bank.
    3. Vergote, Olivier & Studener, Werner & Efthymiadis, Ioannis & Merriman, Niall, 2010. "Main drivers of the ECB financial accounts and ECB financial strength over the first 11 years," Occasional Paper Series 111, European Central Bank.
    4. Holm-Hadulla, Fédéric & Kamath, Kishore & Lamo, Ana & Pérez, Javier J. & Schuknecht, Ludger, 2010. "Public wages in the euro area - towards securing stability and competitiveness," Occasional Paper Series 112, European Central Bank.
    5. van Riet, Ad, 2010. "Euro area fiscal policies and the crisis," Occasional Paper Series 109, European Central Bank.
    6. Gardó, Sándor & Martin, Reiner, 2010. "The impact of the global economic and financial crisis on central, eastern and south-eastern Europe: A stock-taking exercise," Occasional Paper Series 114, European Central Bank.
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    Citations

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    Cited by:

    1. Ambrosino, Angela, 2014. "Il coordinamento nella mediazione civile e commerciale: l’emergenza di norme hayekiane e il percorso “protetto” verso l’ordine sociale," Department of Economics and Statistics Cognetti de Martiis. Working Papers 201406, University of Turin.
    2. Beirne, John & Dalitz, Lars & Ejsing, Jacob & Grothe, Magdalena & Manganelli, Simone & Monar, Fernando & Sahel, Benjamin & Sušec, Matjaž & Tapking, Jens & Vong, Tana, 2011. "The impact of the Eurosystem's covered bond purchase programme on the primary and secondary markets," Occasional Paper Series 122, European Central Bank.
    3. Canova, Fabio & Dallari, Pietro, 2013. "How important is tourism for the international transmission of cyclical fluctuations? Evidence from the Mediterranean," Working Paper Series 1553, European Central Bank.
    4. Canova, Fabio & Ciccarelli, Matteo, 2012. "ClubMed? Cyclical fluctuations in the Mediterranean basin," Journal of International Economics, Elsevier, pages 162-175.
    5. Beniamino Moro, 2013. "The Run On Repo and the Liquidity Shortage Problems of the Current Global Financial Crisis: Europe vs. The US," Ekonomi-tek - International Economics Journal, Turkish Economic Association, pages 41-77.
    6. Lawson, Cornelia & Soós,Sándor, 2014. "A Thematic Mobility Measure for Econometric Analysis," Department of Economics and Statistics Cognetti de Martiis. Working Papers 201408, University of Turin.
    7. Monica SUSANU, 2010. "Romanians’ Public Debts Saga," Economics and Applied Informatics, "Dunarea de Jos" University of Galati, Faculty of Economics and Business Administration, issue 2, pages 199-208.
    8. Canova, Fabio & Ciccarelli, Matteo, 2012. "ClubMed? Cyclical fluctuations in the Mediterranean basin," Journal of International Economics, Elsevier, pages 162-175.
    9. Bodea, Cristina & Huemer, Stefan, 2010. "Dancing together at arm’s length? – The interaction of central banks with governments in the G7," Occasional Paper Series 120, European Central Bank.
    10. Lino Sau, 2015. "Debt deflation worries: a restatement," Review of Keynesian Economics, Edward Elgar Publishing, pages 279-294.
    11. Peeters, Marga & Sabri, Nidal Rachid, 2012. "International financial integration of Mediterranean economies : A bird’s-eye view," MPRA Paper 38081, University Library of Munich, Germany.
    12. di Mauro, Filippo & Forster, Katrin & Lima, Ana, 2010. "The global downturn and its impact on euro area exports and competitiveness," Occasional Paper Series 119, European Central Bank.

    More about this item

    Keywords

    financial sector; Global economic crisis; International spillovers; Mediterranean countries;

    JEL classification:

    • C43 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Index Numbers and Aggregation
    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making

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