Beyond the Crisis: Revisiting Emerging Europe’s Growth Model
April 1, 2010
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Summary
Focusing on the nexus between economic growth and buildup of external vulnerabilities, this paper provides a systematic account of different growth strategies followed in Central and Eastern Europe in 2000-08 and then uses this growth diagnostics to derive implications for the post-crisis recovery. The main findings point to three policy lessons for improving growth sustainability. First, greater reliance on tradable sectors should be the cornerstone of the future growth model. Second, enhancing domestic sources of bank credit funding would contribute to mitigation of external vulnerabilities and make domestic financial system more resilient to global financial shocks. Third, prudential and macroeconomic policies will have to be more proactive in managing capital inflows, including funneling these inflows into investment in the export-oriented industries.
Subject: Capital inflows, Credit, Current account deficits, External debt, Income
Keywords: deficit, economic growth, WP
Pages:
31
Volume:
2010
DOI:
Issue:
092
Series:
Working Paper No. 2010/092
Stock No:
WPIEA2010092
ISBN:
9781451982565
ISSN:
1018-5941
