## The Second Transition: Eastern Europe in Perspective

_IMF Working Papers, March 1, 2009_

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## Bibliographic details
- Authors: Daniel Leigh, Stefania Fabrizio, Ashoka Mody
- Published: March 1, 2009
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781451871913.001

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### Summary and Key Findings
- 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."
- The 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."
  - 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."

### Comparative Mechanisms of Growth
- East Europe:
  - Relied on a "distinctive—often discredited—model."
  - Embraced "financial integration with structural change to compensate for appreciating real exchange rates."
- East Asia:
  - "Contained further financial integration and maintained steady or depreciating real exchange rates."

### Implications, Questions, and Speculation
- The paper poses a central policy and analytical question: "If the East European growth model is distinctive, is it sustainable and replicable?"
- It "speculates on the possibilities" regarding sustainability and replicability of the East European model.
- The analysis implies policy focus on:
  - Monitoring country-specific vulnerabilities that drive regional "hot spots."
  - Understanding the interaction between financial integration, structural change, and real exchange rate dynamics in designing supportive policies.

### Subject Tags and Thematic Focus
- Balance of payments; Current account deficits; Exports; Financial integration; Financial markets; Foreign exchange; Income; International trade; National accounts; Real exchange rates; Transition.

*IMF Working Paper: "The Second Transition: Eastern Europe in Perspective" (authors: Daniel Leigh, Stefania Fabrizio, Ashoka Mody), March 1, 2009.*

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