Europe as a Convergence Engine : Heterogeneity and Investment Opportunities in Emerging Europe
This paper provides empirical evidence that countries in emerging Europe reaped the benefits of international financial integration over the past 12 years by attracting sizeable foreign capital inflows and accelerating medium-term growth. But the a...
| Main Authors: | , |
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| Format: | Policy Research Working Paper |
| Language: | English |
| Published: |
2012
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| Subjects: | |
| Online Access: | http://www-wds.worldbank.org/external/default/main?menuPK=64187510&pagePK=64193027&piPK=64187937&theSitePK=523679&menuPK=64187510&searchMenuPK=64187283&siteName=WDS&entityID=000158349_20111006170943 http://hdl.handle.net/10986/3604 |
| Summary: | This paper provides empirical evidence
that countries in emerging Europe reaped the benefits of
international financial integration over the past 12 years
by attracting sizeable foreign capital inflows and
accelerating medium-term growth. But the aggregate pattern
masks substantial heterogeneity across countries; namely,
new European Union member states and the European Union
candidate countries are different from the European Union
neighborhood. The growth benefits are supported from both a
flow and a stock perspective in terms of the link between
foreign savings and growth. While foreign savings might in
part substitute for national savings, the analysis finds
that the channel to high growth in these countries is,
primarily, through making possible the pursuit of investment
opportunities that would otherwise remain unfunded; in turn,
this seems to be intimately linked to the opportunities
created by European Union membership. Although this
conclusion does not disappear if the outlier observations of
the credit boom period that preceded the financial crisis
are dropped from the sample, it does suggest that these
excesses did not play as positive a role for growth. |
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