Financial Integration and Economic Growth in the European Transition Economies
Economic crisis affected economic activity in the European transition economies (ETE) with an unprecedented extent that may be compared to an initial shock ETE experienced at the beginning of the transition process in the early 1990s. Deterioration of the overall macroeconomic performance was followed by the various spurious effects leading to the slowdown in the process of convergence toward Western European countries. One of the key aspects of this long-term trend - participation of ETE in the process of international capital flows became affected by the economic crisis too. While the overall benefits from the cross-border capital movements significantly contributed to the high rates of real output growth in ETE (most of the countries from this group became large net debtors in the last two decades) during pre-crisis period, sudden shift in a direction as well as a size of a foreign capital inflows may markedly affect the speed of the recovery process from the economic crisis. In the paper we observe main trends in the process of an international financial integration in ten ETE since 1995. To estimate effects of foreign capital inflows on the performance of ETE we analyze effects of foreign direct investments, portfolio investments and other investments on the real output development. To meet this objective we estimate vector error correction (VEC) model. We estimate two models (one with data sets for pre-crisis period only and second for the whole period). To identify structural shocks we implement a Cholesky decomposition of innovations. Impulse-response functions are computed to estimate short-run effects of foreign capital inflows on real output. Compared results for both models should help us to assess the effects of economic crisis. Mutual short-run (temporal) effects of foreign capital inflows on the real output are estimated using linear Granger causality test.
|Date of creation:||Oct 2011|
|Date of revision:|
|Publication status:||Published in Journal of Advanced Studies in Finance 2.2(2011): pp. 116-137|
|Contact details of provider:|| Postal: |
Web page: https://mpra.ub.uni-muenchen.de
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Stiglitz, Joseph E., 2000. "Capital Market Liberalization, Economic Growth, and Instability," World Development, Elsevier, vol. 28(6), pages 1075-1086, June.
- Khalifa Al-Yousif, Yousif, 2002. "Financial development and economic growth: Another look at the evidence from developing countries," Review of Financial Economics, Elsevier, vol. 11(2), pages 131-150.
- Bekaert, Geert & Harvey, Campbell R. & Lundblad, Christian, 2005.
"Does financial liberalization spur growth?,"
Journal of Financial Economics,
Elsevier, vol. 77(1), pages 3-55, July.
- Geert Bekaert & Campbell R. Harvey & Christian Lundblad, 2001. "Does Financial Liberalization Spur Growth?," NBER Working Papers 8245, National Bureau of Economic Research, Inc.
- Geert Bekaert & Campbell R. Harvey & Christian Lundblad, 2004. "Does Financial Liberalization Spur Growth?," Working Paper Research 53, National Bank of Belgium.
- Hasan, Iftekhar & Wachtel , Paul & Zhou, Mingming, 2006.
"Institutional development, financial deepening and economic growth: Evidence from China,"
BOFIT Discussion Papers
12/2006, Bank of Finland, Institute for Economies in Transition.
- Hasan, Iftekhar & Wachtel, Paul & Zhou, Mingming, 2009. "Institutional development, financial deepening and economic growth: Evidence from China," Journal of Banking & Finance, Elsevier, vol. 33(1), pages 157-170, January.
- Linda Goldberg, 2004. "Financial-sector foreign direct investment and host countries: new and old lessons," Staff Reports 183, Federal Reserve Bank of New York.
- Abdelkarim Yahyaoui & Atef Rahmani, 2009. "Financial Development and Economic Growth: Role of Institutional Quality," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 56(3), pages 327-357, September.
- Rajmund MIRDALA, 2012.
"Financial Deepening And Economic Growth In The European Transition Economies,"
Journal of Applied Economic Sciences,
Spiru Haret University, Faculty of Financial Management and Accounting Craiova, vol. 6(6(18)/ Su), pages 177-194.
- Mirdala, Rajmund, 2011. "Financial Deepening and Economic Growth in the European Transition Economies," MPRA Paper 33609, University Library of Munich, Germany.
- Lane, Philip R. & Milesi-Ferretti, Gian Maria, 2007.
"Capital flows to central and Eastern Europe,"
Emerging Markets Review,
Elsevier, vol. 8(2), pages 106-123, May.
- Philip R. Lane & Gian Maria Milesi-Ferretti, 2006. "Capital Flows to Central and Eastern Europe," The Institute for International Integration Studies Discussion Paper Series iiisdp161, IIIS.
- Gian-Maria Milesi-Ferretti & Philip R. Lane, 2006. "Capital Flows to Central and Eastern Europe," IMF Working Papers 06/188, International Monetary Fund.
- Maurice Obstfeld, 2000.
"The Global Capital Market: Benefactor or Menace?,"
- Obstfeld, Maurice, 1998. "The Global Capital Market: Benefactor or Menace?," Center for International and Development Economics Research, Working Paper Series qt3kn3n2s8, Center for International and Development Economics Research, Institute for Business and Economic Research, UC Berkeley.
- Maurice Obstfeld, 1998. "The Global Capital Market: Benefactor or Menace?," NBER Working Papers 6559, National Bureau of Economic Research, Inc.
- Maurice Obstfeld., 1998. "The Global Capital Market: Benefactor or Menace?," Center for International and Development Economics Research (CIDER) Working Papers C98-098, University of California at Berkeley.
- Badi H. Baltagi & Panicos O. Demetriades & Siong Hook Law, 2008.
"Financial Development and Openness: Evidence from Panel Data,"
Center for Policy Research Working Papers
107, Center for Policy Research, Maxwell School, Syracuse University.
- Baltagi, Badi H. & Demetriades, Panicos O. & Law, Siong Hook, 2009. "Financial development and openness: Evidence from panel data," Journal of Development Economics, Elsevier, vol. 89(2), pages 285-296, July.
- Hali J. Edison & Ross Levine & Luca Ricci & Torsten Slok, 2002.
"International Financial Integration and Economic Growth,"
NBER Working Papers
9164, National Bureau of Economic Research, Inc.
- Edison, Hali J. & Levine, Ross & Ricci, Luca & Slok, Torsten, 2002. "International financial integration and economic growth," Journal of International Money and Finance, Elsevier, vol. 21(6), pages 749-776, November.
- Torsten SlÃ¸k & Hali J. Edison & Luca Antonio Ricci & Ross Levine, 2002. "International Financial Integration and Economic Growth," IMF Working Papers 02/145, International Monetary Fund.
- Sebastian Edwards, 2001. "Capital Mobility and Economic Performance: Are Emerging Economies Different?," NBER Working Papers 8076, National Bureau of Economic Research, Inc.
- Engle, Robert F & Granger, Clive W J, 1987. "Co-integration and Error Correction: Representation, Estimation, and Testing," Econometrica, Econometric Society, vol. 55(2), pages 251-76, March.
- Nicholas Apergis & Ioannis Filippidis & Claire Economidou, 2007. "Financial Deepening and Economic Growth Linkages: A Panel Data Analysis," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 143(1), pages 179-198, April.
- Christopoulos, Dimitris K. & Tsionas, Efthymios G., 2004. "Financial development and economic growth: evidence from panel unit root and cointegration tests," Journal of Development Economics, Elsevier, vol. 73(1), pages 55-74, February.
- Piotr Misztal, 2010.
"Foreign Direct Investments, as a Factor for Economic Growth in Romania,"
Journal of Advanced Studies in Finance,
ASERS Publishing, vol. 0(1), pages 72-82, June.
- Piotr MISZTAL, 2010. "Foreign Direct Investments As A Factor For Economic Growth In Romania," Review of Economic and Business Studies, Alexandru Ioan Cuza University, Faculty of Economics and Business Administration, issue 5, pages 39-53, June.
- Vasilescu Laura GIURCA & Ana POPA, 2009. "Global FDI flows under the pressure of financial crisis," Journal of Applied Research in Finance Bi-Annually, ASERS Publishing, vol. 0(2), pages 105-112, December.
When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:36695. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Ekkehart Schlicht)
If references are entirely missing, you can add them using this form.