Vulnerabilities in Emerging Southeastern Europe—How Much Cause for Concern?
October 1, 2007
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Summary
While large inflows of capital into Southeastern Europe (SEE) have raised incomes, this has increased vulnerability to financial risks, which, if realized, can lead to costly adjustments. Traditional vulnerability indicators in SEE have reached levels that in other countries have not been sustainable, and sectoral analysis shows rising imbalances and raises questions about efficient use of the inflows. While factors related to EU integration mitigate these vulnerabilities, weaker institutions reduce these benefits in SEE compared to more advanced European emerging markets. To insure against setbacks to income convergence, SEE policymakers should take measures to reverse the buildup of vulnerabilities.
Subject: Banking, Credit, Currencies, Emerging and frontier financial markets, Foreign banks
Keywords: balance sheet, EU integration, exchange rate, foreign currency, parent bank, SEE country, WP
Pages:
44
Volume:
2007
DOI:
Issue:
236
Series:
Working Paper No. 2007/236
Stock No:
WPIEA2007236
ISBN:
9781451868005
ISSN:
1018-5941
