As analysed in previous chapters, the countries of SEE have employed diverse exchange rate regime... more As analysed in previous chapters, the countries of SEE have employed diverse exchange rate regimes, which were the result of different circumstances in each country. Among other things, these regimes reflect the extent of progress in the transition process, the preferred approach to stabilization as well as the authorities’ reaction to economic shocks. As a matter of fact, with respect to current exchange rate arrangements, one can see that basically there are two types of exchange rate regimes in the region. More specifically, three countries have fixed regimes – Bulgaria, BH and FYROM – and the first two of these operate on a currency board arrangement while the third has a de facto peg arrangement. The remaining four economies prefer a managed floating regime. Furthermore, it must be pointed out that two territories of Serbia and Montenegro, namely Montenegro and Kosovo, have shifted to euroization, which essentially constitutes an irreversible peg; they have unilaterally adopted the euro as ‘legal tender and the sole official currency’.1 Overall, the chosen regimes manifest not only the degree of willingness but also the extent to which the economic circumstances in some countries allow the policy-makers to rely on greater exchange rate stability as a basic tool for macroeconomic stabilization.
As analysed in previous chapters, the countries of SEE have employed diverse exchange rate regime... more As analysed in previous chapters, the countries of SEE have employed diverse exchange rate regimes, which were the result of different circumstances in each country. Among other things, these regimes reflect the extent of progress in the transition process, the preferred approach to stabilization as well as the authorities’ reaction to economic shocks. As a matter of fact, with respect to current exchange rate arrangements, one can see that basically there are two types of exchange rate regimes in the region. More specifically, three countries have fixed regimes – Bulgaria, BH and FYROM – and the first two of these operate on a currency board arrangement while the third has a de facto peg arrangement. The remaining four economies prefer a managed floating regime. Furthermore, it must be pointed out that two territories of Serbia and Montenegro, namely Montenegro and Kosovo, have shifted to euroization, which essentially constitutes an irreversible peg; they have unilaterally adopted the euro as ‘legal tender and the sole official currency’.1 Overall, the chosen regimes manifest not only the degree of willingness but also the extent to which the economic circumstances in some countries allow the policy-makers to rely on greater exchange rate stability as a basic tool for macroeconomic stabilization.
Introduction PART I: THE TRANSITION EXPERIENCE OF THE SOUTHEAST EUROPEAN COUNTRIES The Stylized F... more Introduction PART I: THE TRANSITION EXPERIENCE OF THE SOUTHEAST EUROPEAN COUNTRIES The Stylized Facts of Transition in Southeastern Europe The Impact of Initial Conditions Macroeconomic Stabilization and Performance I: The Period Prior to the Kosovo War Macroeconomic Stabilization and Performance II: The Period After the Kosovo War Structural Reform An Empirical Assessment of the Growth Determinants in Southeastern Europe PART II: EXTERNAL ECONOMIC RELATIONS Trade Integration Foreign Direct Investment in Southeastern Europe The Euro and the Exchange Rate Regimes of the Southeast European Countries
Introduction PART I: THE TRANSITION EXPERIENCE OF THE SOUTHEAST EUROPEAN COUNTRIES The Stylized F... more Introduction PART I: THE TRANSITION EXPERIENCE OF THE SOUTHEAST EUROPEAN COUNTRIES The Stylized Facts of Transition in Southeastern Europe The Impact of Initial Conditions Macroeconomic Stabilization and Performance I: The Period Prior to the Kosovo War Macroeconomic Stabilization and Performance II: The Period After the Kosovo War Structural Reform An Empirical Assessment of the Growth Determinants in Southeastern Europe PART II: EXTERNAL ECONOMIC RELATIONS Trade Integration Foreign Direct Investment in Southeastern Europe The Euro and the Exchange Rate Regimes of the Southeast European Countries
After a significant output decline during the early stages of transition, which primarily reflect... more After a significant output decline during the early stages of transition, which primarily reflected the adverse initial conditions as well as the strong disinflationary policy stand, most transition economies moved into positive rates of growth. More specifically, by the end of 1994 the majority of the transition economies of Eastern and Central Europe recorded positive rates of growth that have been sustained up to the end of 1997. An important issue with respect to these output developments in the transition economies refers to the role of the exchange rate policies adopted by the countries in question. As a matter of fact, it represents an important aspect of exchange rate policy that has been somewhat overlooked. That is, while the relative merits of alternative exchange rate regimes regarding the stabilization process of these countries have been examined in detail, their effect on output growth has not received significant attention.
After a significant output decline during the early stages of transition, which primarily reflect... more After a significant output decline during the early stages of transition, which primarily reflected the adverse initial conditions as well as the strong disinflationary policy stand, most transition economies moved into positive rates of growth. More specifically, by the end of 1994 the majority of the transition economies of Eastern and Central Europe recorded positive rates of growth that have been sustained up to the end of 1997. An important issue with respect to these output developments in the transition economies refers to the role of the exchange rate policies adopted by the countries in question. As a matter of fact, it represents an important aspect of exchange rate policy that has been somewhat overlooked. That is, while the relative merits of alternative exchange rate regimes regarding the stabilization process of these countries have been examined in detail, their effect on output growth has not received significant attention.
In the preceding chapters we examined different aspects of the transition process for the countri... more In the preceding chapters we examined different aspects of the transition process for the countries of SEE. More specifically, after presenting the basic facts of transition for the particular economies, our analysis focused on three broad determinants which greatly affected transition and thus the economic performance of the particular countries: initial conditions, macroeconomic stabilization and structural reforms. A common conclusion regarding conditions and developments with respect to these three broad factors referred to the fact that they were not as favourable in the case of SEE.
In the preceding chapters we examined different aspects of the transition process for the countri... more In the preceding chapters we examined different aspects of the transition process for the countries of SEE. More specifically, after presenting the basic facts of transition for the particular economies, our analysis focused on three broad determinants which greatly affected transition and thus the economic performance of the particular countries: initial conditions, macroeconomic stabilization and structural reforms. A common conclusion regarding conditions and developments with respect to these three broad factors referred to the fact that they were not as favourable in the case of SEE.
Macroeconomic stabilization has been a vital part of the transition process since it constituted ... more Macroeconomic stabilization has been a vital part of the transition process since it constituted a key precondition for the objective of raising efficiency and promoting growth. In Chapter 2 we pointed out that the rise in inflation and the decline in output constituted the two major stylized facts of transition which were particularly profound in the case of the economies of SEE. Furthermore, we indicated that the slow recovery as well as the output reversals that some of the South East European economies experienced were closely connected to ineffective disinflation which was manifested through corresponding inflation reversals. This, except for cases of civil strife and war, constituted significant evidence for the strong linkage between consistent macroeconomic policies and sustainable growth.
Macroeconomic stabilization has been a vital part of the transition process since it constituted ... more Macroeconomic stabilization has been a vital part of the transition process since it constituted a key precondition for the objective of raising efficiency and promoting growth. In Chapter 2 we pointed out that the rise in inflation and the decline in output constituted the two major stylized facts of transition which were particularly profound in the case of the economies of SEE. Furthermore, we indicated that the slow recovery as well as the output reversals that some of the South East European economies experienced were closely connected to ineffective disinflation which was manifested through corresponding inflation reversals. This, except for cases of civil strife and war, constituted significant evidence for the strong linkage between consistent macroeconomic policies and sustainable growth.
The countries of the SEE region to a large degree experienced the stylized facts that characteriz... more The countries of the SEE region to a large degree experienced the stylized facts that characterized the transition process in most of these economies, primarily during the first decade of transition: that is, basic economic variables to a certain extent displayed the same or similar trends as in other countries or regions in transition, such as the countries of CE. At the same time, however, they exhibited significant variations. These variations can be attributed to substantial differences in several factors such as the economic circumstances at the onset of transition, the effectiveness of policy and reform measures and the political conditions, particularly the emergence of wars and ethnic conflicts.
The countries of the SEE region to a large degree experienced the stylized facts that characteriz... more The countries of the SEE region to a large degree experienced the stylized facts that characterized the transition process in most of these economies, primarily during the first decade of transition: that is, basic economic variables to a certain extent displayed the same or similar trends as in other countries or regions in transition, such as the countries of CE. At the same time, however, they exhibited significant variations. These variations can be attributed to substantial differences in several factors such as the economic circumstances at the onset of transition, the effectiveness of policy and reform measures and the political conditions, particularly the emergence of wars and ethnic conflicts.
Exchange Rate Policies, Prices and Supply-Side Response, 2001
It has become a stylized fact that transition economies suffer falls in output in the early years... more It has become a stylized fact that transition economies suffer falls in output in the early years of liberalization, and several reasons have been postulated for this fall in real GDP. Borensztein, Demekas and Ostry (1993) argue, for example, that for Bulgaria and the Czech Republic supply shocks were the most important explanation with national factors capable of explaining nearly all the variation in output with sector-specific factors playing only a minor role. An alternative hypothesis due to Calvo and Coricelli (1992) is the credit-crunch hypothesis, whereby high real interest rates were imposed on enterprises, which responded by reducing their demand for credit and output levels. A third hypothesis is that at least part of the fall in output is a statistical exaggeration due to underreporting of private sector activity (Berg and Sachs, 1992; and Berg and Blanchard, 1994).
Exchange Rate Policies, Prices and Supply-Side Response, 2001
The significant fall in output was a common experience of all transition economies of Central and... more The significant fall in output was a common experience of all transition economies of Central and Eastern Europe in the early 1990s. This fall in output was to a large extent unavoidable due to the destruction of the existing structure of production as these economies moved to new, market-guided activities. While the output decline has been a common event in all these countries, the extent of output recovery, as the transition process has progressed, has not been the same. That is, while most countries have followed qualitatively the same steps, their growth paths have deviated significantly. There are countries with quite impressive growth performance, while others have lagged significantly behind.
As analysed in previous chapters, the countries of SEE have employed diverse exchange rate regime... more As analysed in previous chapters, the countries of SEE have employed diverse exchange rate regimes, which were the result of different circumstances in each country. Among other things, these regimes reflect the extent of progress in the transition process, the preferred approach to stabilization as well as the authorities’ reaction to economic shocks. As a matter of fact, with respect to current exchange rate arrangements, one can see that basically there are two types of exchange rate regimes in the region. More specifically, three countries have fixed regimes – Bulgaria, BH and FYROM – and the first two of these operate on a currency board arrangement while the third has a de facto peg arrangement. The remaining four economies prefer a managed floating regime. Furthermore, it must be pointed out that two territories of Serbia and Montenegro, namely Montenegro and Kosovo, have shifted to euroization, which essentially constitutes an irreversible peg; they have unilaterally adopted the euro as ‘legal tender and the sole official currency’.1 Overall, the chosen regimes manifest not only the degree of willingness but also the extent to which the economic circumstances in some countries allow the policy-makers to rely on greater exchange rate stability as a basic tool for macroeconomic stabilization.
As analysed in previous chapters, the countries of SEE have employed diverse exchange rate regime... more As analysed in previous chapters, the countries of SEE have employed diverse exchange rate regimes, which were the result of different circumstances in each country. Among other things, these regimes reflect the extent of progress in the transition process, the preferred approach to stabilization as well as the authorities’ reaction to economic shocks. As a matter of fact, with respect to current exchange rate arrangements, one can see that basically there are two types of exchange rate regimes in the region. More specifically, three countries have fixed regimes – Bulgaria, BH and FYROM – and the first two of these operate on a currency board arrangement while the third has a de facto peg arrangement. The remaining four economies prefer a managed floating regime. Furthermore, it must be pointed out that two territories of Serbia and Montenegro, namely Montenegro and Kosovo, have shifted to euroization, which essentially constitutes an irreversible peg; they have unilaterally adopted the euro as ‘legal tender and the sole official currency’.1 Overall, the chosen regimes manifest not only the degree of willingness but also the extent to which the economic circumstances in some countries allow the policy-makers to rely on greater exchange rate stability as a basic tool for macroeconomic stabilization.
Introduction PART I: THE TRANSITION EXPERIENCE OF THE SOUTHEAST EUROPEAN COUNTRIES The Stylized F... more Introduction PART I: THE TRANSITION EXPERIENCE OF THE SOUTHEAST EUROPEAN COUNTRIES The Stylized Facts of Transition in Southeastern Europe The Impact of Initial Conditions Macroeconomic Stabilization and Performance I: The Period Prior to the Kosovo War Macroeconomic Stabilization and Performance II: The Period After the Kosovo War Structural Reform An Empirical Assessment of the Growth Determinants in Southeastern Europe PART II: EXTERNAL ECONOMIC RELATIONS Trade Integration Foreign Direct Investment in Southeastern Europe The Euro and the Exchange Rate Regimes of the Southeast European Countries
Introduction PART I: THE TRANSITION EXPERIENCE OF THE SOUTHEAST EUROPEAN COUNTRIES The Stylized F... more Introduction PART I: THE TRANSITION EXPERIENCE OF THE SOUTHEAST EUROPEAN COUNTRIES The Stylized Facts of Transition in Southeastern Europe The Impact of Initial Conditions Macroeconomic Stabilization and Performance I: The Period Prior to the Kosovo War Macroeconomic Stabilization and Performance II: The Period After the Kosovo War Structural Reform An Empirical Assessment of the Growth Determinants in Southeastern Europe PART II: EXTERNAL ECONOMIC RELATIONS Trade Integration Foreign Direct Investment in Southeastern Europe The Euro and the Exchange Rate Regimes of the Southeast European Countries
After a significant output decline during the early stages of transition, which primarily reflect... more After a significant output decline during the early stages of transition, which primarily reflected the adverse initial conditions as well as the strong disinflationary policy stand, most transition economies moved into positive rates of growth. More specifically, by the end of 1994 the majority of the transition economies of Eastern and Central Europe recorded positive rates of growth that have been sustained up to the end of 1997. An important issue with respect to these output developments in the transition economies refers to the role of the exchange rate policies adopted by the countries in question. As a matter of fact, it represents an important aspect of exchange rate policy that has been somewhat overlooked. That is, while the relative merits of alternative exchange rate regimes regarding the stabilization process of these countries have been examined in detail, their effect on output growth has not received significant attention.
After a significant output decline during the early stages of transition, which primarily reflect... more After a significant output decline during the early stages of transition, which primarily reflected the adverse initial conditions as well as the strong disinflationary policy stand, most transition economies moved into positive rates of growth. More specifically, by the end of 1994 the majority of the transition economies of Eastern and Central Europe recorded positive rates of growth that have been sustained up to the end of 1997. An important issue with respect to these output developments in the transition economies refers to the role of the exchange rate policies adopted by the countries in question. As a matter of fact, it represents an important aspect of exchange rate policy that has been somewhat overlooked. That is, while the relative merits of alternative exchange rate regimes regarding the stabilization process of these countries have been examined in detail, their effect on output growth has not received significant attention.
In the preceding chapters we examined different aspects of the transition process for the countri... more In the preceding chapters we examined different aspects of the transition process for the countries of SEE. More specifically, after presenting the basic facts of transition for the particular economies, our analysis focused on three broad determinants which greatly affected transition and thus the economic performance of the particular countries: initial conditions, macroeconomic stabilization and structural reforms. A common conclusion regarding conditions and developments with respect to these three broad factors referred to the fact that they were not as favourable in the case of SEE.
In the preceding chapters we examined different aspects of the transition process for the countri... more In the preceding chapters we examined different aspects of the transition process for the countries of SEE. More specifically, after presenting the basic facts of transition for the particular economies, our analysis focused on three broad determinants which greatly affected transition and thus the economic performance of the particular countries: initial conditions, macroeconomic stabilization and structural reforms. A common conclusion regarding conditions and developments with respect to these three broad factors referred to the fact that they were not as favourable in the case of SEE.
Macroeconomic stabilization has been a vital part of the transition process since it constituted ... more Macroeconomic stabilization has been a vital part of the transition process since it constituted a key precondition for the objective of raising efficiency and promoting growth. In Chapter 2 we pointed out that the rise in inflation and the decline in output constituted the two major stylized facts of transition which were particularly profound in the case of the economies of SEE. Furthermore, we indicated that the slow recovery as well as the output reversals that some of the South East European economies experienced were closely connected to ineffective disinflation which was manifested through corresponding inflation reversals. This, except for cases of civil strife and war, constituted significant evidence for the strong linkage between consistent macroeconomic policies and sustainable growth.
Macroeconomic stabilization has been a vital part of the transition process since it constituted ... more Macroeconomic stabilization has been a vital part of the transition process since it constituted a key precondition for the objective of raising efficiency and promoting growth. In Chapter 2 we pointed out that the rise in inflation and the decline in output constituted the two major stylized facts of transition which were particularly profound in the case of the economies of SEE. Furthermore, we indicated that the slow recovery as well as the output reversals that some of the South East European economies experienced were closely connected to ineffective disinflation which was manifested through corresponding inflation reversals. This, except for cases of civil strife and war, constituted significant evidence for the strong linkage between consistent macroeconomic policies and sustainable growth.
The countries of the SEE region to a large degree experienced the stylized facts that characteriz... more The countries of the SEE region to a large degree experienced the stylized facts that characterized the transition process in most of these economies, primarily during the first decade of transition: that is, basic economic variables to a certain extent displayed the same or similar trends as in other countries or regions in transition, such as the countries of CE. At the same time, however, they exhibited significant variations. These variations can be attributed to substantial differences in several factors such as the economic circumstances at the onset of transition, the effectiveness of policy and reform measures and the political conditions, particularly the emergence of wars and ethnic conflicts.
The countries of the SEE region to a large degree experienced the stylized facts that characteriz... more The countries of the SEE region to a large degree experienced the stylized facts that characterized the transition process in most of these economies, primarily during the first decade of transition: that is, basic economic variables to a certain extent displayed the same or similar trends as in other countries or regions in transition, such as the countries of CE. At the same time, however, they exhibited significant variations. These variations can be attributed to substantial differences in several factors such as the economic circumstances at the onset of transition, the effectiveness of policy and reform measures and the political conditions, particularly the emergence of wars and ethnic conflicts.
Exchange Rate Policies, Prices and Supply-Side Response, 2001
It has become a stylized fact that transition economies suffer falls in output in the early years... more It has become a stylized fact that transition economies suffer falls in output in the early years of liberalization, and several reasons have been postulated for this fall in real GDP. Borensztein, Demekas and Ostry (1993) argue, for example, that for Bulgaria and the Czech Republic supply shocks were the most important explanation with national factors capable of explaining nearly all the variation in output with sector-specific factors playing only a minor role. An alternative hypothesis due to Calvo and Coricelli (1992) is the credit-crunch hypothesis, whereby high real interest rates were imposed on enterprises, which responded by reducing their demand for credit and output levels. A third hypothesis is that at least part of the fall in output is a statistical exaggeration due to underreporting of private sector activity (Berg and Sachs, 1992; and Berg and Blanchard, 1994).
Exchange Rate Policies, Prices and Supply-Side Response, 2001
The significant fall in output was a common experience of all transition economies of Central and... more The significant fall in output was a common experience of all transition economies of Central and Eastern Europe in the early 1990s. This fall in output was to a large extent unavoidable due to the destruction of the existing structure of production as these economies moved to new, market-guided activities. While the output decline has been a common event in all these countries, the extent of output recovery, as the transition process has progressed, has not been the same. That is, while most countries have followed qualitatively the same steps, their growth paths have deviated significantly. There are countries with quite impressive growth performance, while others have lagged significantly behind.
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