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Volume 59, Issue 6

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The Financial Crisis and European Emerging Economies

Čihák, Martin; Mitra, Srobona

Year: 2009   Volume: 59   Issue: 6   Pages: 541-553

Abstract: The crisis has affected all European economies, but it has also brought into relief the substantial differentiation across the region. We demonstrate that it has put an increased premium on sound macroeconomic and macroprudential policies: economies with lower inflation, smaller current account deficits, and lower dependence on bank-related capital inflows have fared significantly better. We also show that the crisis has led to the disappearance of the so-called “halo effect”, which was the observation in the pre-crisis period that spreads on sovereign bonds in the new European Union member countries were lower than could be explained by fundamentals.

JEL classification: F34, F36, G15, G21

Keywords: financial crisis, emerging economies, Europe

RePEc: http://ideas.repec.org/a/fau/fauart/v59y2009i6p541-553.html

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