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 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.

Bibliographic Details

Main Authors:	Stojkov, Aleksandar, Zalduendo, Juan
Language:	English
Published:	2011-10-01
Subjects:	ABSOLUTE VALUE, ABSORPTIVE CAPACITY, ACCESSION COUNTRIES, ADVANCED ECONOMIES, ANNUAL GROWTH, ANNUAL GROWTH RATE, ASSETS, AVERAGE GROWTH, AVERAGE GROWTH RATE, BALANCE OF PAYMENTS, BANKING SYSTEM, BENCHMARK, BUSINESS CYCLE, CAPITAL ACCOUNT, CAPITAL ACCOUNT RESTRICTIONS, CAPITAL ACCOUNT TRANSACTIONS, CAPITAL CONTROLS, CAPITAL FLOW, CAPITAL FLOWS, CAPITAL FORMATION, CAPITAL GOODS, CAPITAL INFLOW, CAPITAL INFLOWS, CAPITAL MOBILITY, CAPITAL STOCK, CENTRAL PLANNING, COLLATERAL, CONSUMER CHOICE, CONSUMPTION SMOOTHING, CONTROL VARIABLES, CONVERGENCE HYPOTHESIS, COUNTRY DUMMY, CREDIT BOOM, CURRENCY, CURRENCY CRISES, CURRENT ACCOUNT, CURRENT ACCOUNT BALANCE, CURRENT ACCOUNT BALANCES, CURRENT ACCOUNT DEFICIT, CURRENT ACCOUNT DEFICITS, CURRENT ACCOUNT POSITIONS, CURRENT ACCOUNT SURPLUSES, CURRENT ACCOUNT TRANSACTIONS, DEBT, DEPENDENCY RATIO, DEPENDENT VARIABLE, DEPOSITS, DEPRECIATION, DEVELOPING COUNTRIES, DEVELOPMENT ECONOMICS, DEVELOPMENT POLICY, DISTORTIONS, DOMESTIC BANKS, DOMESTIC FINANCIAL SECTOR, DOMESTIC SAVING, DOMESTIC SAVINGS, DUMMY VARIABLE, DUMMY VARIABLES, DYNAMIC PANEL, ECONOMETRIC ANALYSIS, ECONOMETRICS, ECONOMIC GROWTH, ECONOMIC HISTORY, ECONOMIC INTEGRATION, ECONOMIC MODEL, ECONOMIC POLICY, ECONOMIC REFORMS, ECONOMIC RESEARCH, ECONOMIC THEORY, ECONOMICS, EDUCATIONAL ATTAINMENT, EMPIRICAL EVIDENCE, EMPIRICAL LITERATURE, EMPIRICAL RESULTS, EMPIRICAL STUDIES, EMPIRICAL WORK, ENDOGENOUS GROWTH THEORIES, ENDOGENOUS VARIABLES, EQUATIONS, ERROR TERM, ERROR TERMS, ESTIMATED COEFFICIENT, ESTIMATED COEFFICIENTS, ESTIMATION RESULTS, EXCHANGE ARRANGEMENTS, EXCHANGE RATES, EXCHANGE RESTRICTIONS, EXPLANATORY VARIABLE, EXPLANATORY VARIABLES, EXPORTS, EXPOSURE, EXPOSURES, EXTERNAL FINANCING, EXTERNAL IMBALANCES, FINANCIAL ASSETS, FINANCIAL CRISIS, FINANCIAL DEPTH, FINANCIAL DEVELOPMENT, FINANCIAL INTERMEDIATION, FINANCIAL LIBERALIZATION, FINANCIAL MARKETS, FINANCIAL OPENNESS, FINANCIAL SECTOR, FOREIGN ASSET, FOREIGN ASSET POSITION, FOREIGN ASSET POSITIONS, FOREIGN ASSETS, FOREIGN CAPITAL, FOREIGN EXCHANGE, FOREIGN EXCHANGE RESERVES, FOREIGN LIABILITIES, GDP DEFLATOR, GDP PER CAPITA, GENERAL EQUILIBRIUM, GLOBAL ECONOMY, GLOBAL IMBALANCES, GLOBALIZATION, GRADUAL CAPITAL ACCOUNT LIBERALIZATION, GROSS CAPITAL FORMATION, GROWTH DETERMINANTS, GROWTH EQUATION, GROWTH IMPACT, GROWTH LITERATURE, GROWTH MODEL, GROWTH MODELS, GROWTH PERFORMANCE, GROWTH PROCESS, GROWTH RATE, GROWTH RATES, GROWTH REGRESSION, GROWTH REGRESSIONS, GROWTH THEORIES, GROWTH THEORY, HIGH GROWTH, HUMAN CAPITAL, IMBALANCE, IMBALANCES, IMPORTS, INCOME, INDICATOR VARIABLE, INFLATION, INFLATION RATE, INTERNATIONAL ECONOMICS, INTERNATIONAL FINANCIAL INTEGRATION, INTERNATIONAL TRADE, INVESTMENT DEMAND, INVESTMENT OPPORTUNITIES, INVESTMENT RATES, LAGGED DEPENDENT, LEVEL OF INVESTMENT, LONG RUN, LONG-RUN GROWTH, LOW-INCOME COUNTRIES,
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 https://hdl.handle.net/10986/3604
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