Economists have argued that corruption in business can potentially grease the wheels of an economy. This column presents evidence from nine Central and Eastern European countries on the effects of bribes on the efficiency with which production factors are allocated across firms. The impact of corruption on capital and labour misallocation is larger the smaller the country, the lower its political stability and the weaker the quality of its regulation. This is evidence against the ‘grease the wheels’ hypothesis.
Elisa Gamberoni, Christine Gartner, Claire Giordano, Paloma Lopez-Garcia, 21 October 2016
Aasim Husain, Anna Ilyina, Li Zeng, 29 August 2014
The conflict in Ukraine and the sanctions against Russia have already affected the Russian financial markets. This column discusses the repercussions for the rest of Europe of possible disruptions in the trade and financial flows with Russia. Eastern European countries could be seriously affected by a slowdown in the Russian economy due to their close links with Russia. Western countries – despite having looser links with it – could also experience significant effects.
Erik Feyen, Raquel Letelier, Inessa Love, Samuel Maimbo, Roberto Rocha, 15 March 2014
Eastern Europe was hit especially hard by the credit crunch during the global financial crisis. This column presents new evidence suggesting that reliance on foreign funding was more important than foreign bank ownership per se in exacerbating the post-crisis credit contraction. These findings point to the need to put more emphasis on the discussion of bank business models, regulatory standards, and supervisory arrangements.
Joakim Ruist, 17 September 2013
This year the free movement of eastern European workers within the EU has been questioned. Fearing excessive use of their own welfare systems, governments have argued for continued access restrictions. This column presents research showing that eastern European migrants have been net contributors to public finances of the richer EU15 nations that received them.
Thorvaldur Gylfason, Eduard Hochreiter, 08 December 2010
Croatia and Latvia both gained independence in the early 1990s. This column tracks their progress since. It shows that the two are growing but at different rates and with varying cycles. It argues that investment in human capital, good governance, and institutional reform have been vital for development and while Latvia is catching up, Croatia remains the more efficient and wealthier of the two.
Indermit Gill, 09 October 2010
Economic development is not evenly spread, and in some places it is still yet to arrive. This column looks at suggestions from the World Bank’s World Development Report to combat this inequality. It argues that economic growth will be unbalanced, and to try to spread it out – too much, too far, or too soon – is to discourage it. Instead, policymakers should focus on economic integration.
Martin Brown, Karolin Kirschenmann, Steven Ongena, 13 September 2010
Foreign-currency loans in Eastern Europe are seen as a major threat to financial stability. Why then are they so widespread? This column presents evidence from over 100,000 loans made by a Bulgarian bank between 2003 and 2007. It finds that one-third of foreign-currency loans were actually requested in local currency by the firm, suggesting that banks are pushing them.
Vladimir Gligorov, Michael Landesmann, 16 March 2009
Eastern European countries have high external imbalances that constrain their policy responses to the crisis. This column says the EU should provide support through both fiscal and financial measures. Otherwise, it risks a much deeper and prolonged economic crisis in both new and potential member states that will have negative effects on the whole of Europe.
Erik Berglöf, 28 February 2009
Eastern European nations are on the edge. In this column, the Chief Economist of the European Bank for Reconstruction and Development argues that widespread banking crises are possible, if Western governments fail to coordinate. The situation is manageable, but it needs to be managed.