The global crisis of 2007–2009 can be viewed as three interdependent and mutually reinforcing crises: a financial crisis, a liquidity crisis, and a crisis in the real economy. The ten East European countries that are now EU members were hit first by the global liquidity crisis, then by dramatic declines in capital inflows and plunging demand for their exports. Different impacts among the ten are explained by such factors as their exchange rate regimes, the extent to which households found it advantageous to rely on foreign-currency loans and the appropriateness of fiscal and monetary policies prior to the crisis. Since Western Europe’s recovery and growth are likely to be slow, in the future East European countries will have to rely relatively more on internally-generated sources of productivity growth and enhanced global competitiveness.
a fixed exchangerateregime makes a difference in the relationship between misalignment and growth. We also investigate asymmetries (over-vs. undervaluation) and nonlinearities in the growth-misalignment relationship. Fourth, we amend earlier
The analysis of household foreign currency (FX) lending begins with a short review of the theoretical and empirical literature. I investigate the factors that have helped or hindered such lending, particularly in Central and Eastern Europe. The study goes on to look at the experiences in Poland, Romania and Hungary. The choice is based on the fact that all three countries operate a flexible exchange rate regime and that household FX lending is prevalent in all of them. The analysis of each country touches upon the factors that have contributed to the local development of FX borrowing. However, the study focuses on the regulatory measures taken to curb such lending. The study concludes with a review and critical assessment of the policies that have been adopted with an eye to solving social and economic difficulties arising from FX indebtedness.
Authors:Bruno Ćorić, Lena Malešević Perović, and Vladimir Šimić
This study explores cross-country variations in the size of the effects of a monetary policy shock on output using the sample of 48 developed and developing countries. The structural vector autoregression model is used to estimate monetary policy effects for each country separately. Based on the estimated impulse responses, we construct a measure of the short-run monetary policy effect on output, which is used as the dependent variable in a cross-country regression. Our results suggest that the effects of monetary policy shock on output are significantly influenced by trade openness, exchange rate regime, correlation with the US and for European countries with the German economy, and the development of the banking sector.