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The Real Effect of Financial Crises in the European Transition Economies

Author

Listed:
  • Davide Furceri

    (OCDE / OECD - Organisation de Coopération et de Développement Economiques = Organisation for Economic Co-operation and Development)

  • Aleksandra Zdzienicka-Durand

    (GATE - Groupe d'analyse et de théorie économique - UL2 - Université Lumière - Lyon 2 - ENS LSH - Ecole Normale Supérieure-Lettres et Sciences Humaines - CNRS - Centre National de la Recherche Scientifique)

Abstract

The aim of this work is to assess the impact of financial crises on output for 11 European transition economies (CEECs). The results suggest that financial crises have a significant and permanent effect, lowering long-term output by about 17 percent. The effect is more important in smaller countries, with relative higher dependence on external financing, and in which the banking sector noticed more important financial disequilibria. We also found that fiscal policy measures have been the most efficient tools in dealing with the crises, while the role of monetary policy instruments has been rather blinded. Exchange rate resulted to be more a propagator than a crises absorber, while the IMF credit has been found to have positive (but not significant) impact on growth performance. Finally, the effect for the CEECs is much bigger than in the EU advanced economies, for which we found that financial crises lowers long-term output only by 2 percent.

Suggested Citation

  • Davide Furceri & Aleksandra Zdzienicka-Durand, 2011. "The Real Effect of Financial Crises in the European Transition Economies," Post-Print halshs-00431044, HAL.
    • Handle: RePEc:hal:journl:halshs-00431044
    Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-00431044v1
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    JEL classification:

    • G1 - Financial Economics - - General Financial Markets
    • E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook

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