The Second Transition: Eastern Europe in Perspective

By Daniel Leigh, Stefania Fabrizio, Ashoka Mody

March 1, 2009

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Daniel Leigh, Stefania Fabrizio, and Ashoka Mody. The Second Transition: Eastern Europe in Perspective, (USA: International Monetary Fund, 2009) accessed September 18, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

The countries of Eastern Europe achieved two remarkable transitions in the short period of the last two decades: from plan to market and, then, in the run-up to and entry into the European Union, they rode a wave of global trade and financial market integration. Focusing on the second transition, this paper reaches three conclusions. First, by several metrics, East European and East Asian growth performances were about on par from the mid-1990s; both regions far surpassed Latin American growth. Second, the mechanisms of growth in East Europe and East Asia were, however, very different. East Europe relied on a distinctive-often discredited-model, embracing financial integration with structural change to compensate for appreciating real exchange rates. In contrast, East Asia contained further financial integration and maintained steady or depreciating real exchange rates. Third, the ongoing financial turbulence has, thus far, not had an obviously differential impact on emerging market regions: rather, the hot spots in each region reflect individual country vulnerabilities. If the East European growth model is distinctive, is it sustainable and replicable? The paper speculates on the possibilities.

Subject: Balance of payments, Current account deficits, Exports, Financial integration, Financial markets, Foreign exchange, Income, International trade, National accounts, Real exchange rates

Keywords: And Financial Integration, Asia and Pacific, Baltics, CEE achievement, CEE country, CEE economy, CEE experience, CEE model, CEE openness ratio, CEE share, Current account deficits, East Asia, Eastern Europe, Exports, Financial integration, Global, Growth, Income, Real exchange rates, Trade, Transition, WP

Publication Details

Pages:

35
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2009/043
Stock No:

WPIEA2009043
ISBN:

9781451871913
ISSN:

1018-5941

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