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The report takes an in-depth look at the types of finance the transition region requires to move towards sustainable growth. In the post-crisis era, growth in the region has come to a virtual standstill. As a result, there is little convergence with advanced countries and the report concludes that the region requires a variety of funding sources, as well as structural reform, to address the investment gap that currently exists.
The report assesses the balance between debt and equity financing, between foreign currency and local currency finance and between external and domestic funding. In particular, the report assesses in detail the role of private equity as a form of growth capital in the EBRD’s countries of operations. It also looks at whether the balance is right between public, household and corporate debt. Finally, the report considers how the balance between traditional western European foreign direct investment and funding from further-flung regions might be improved.

Ugo Panizza, Andrea Presbitero, 25 April 2013

The very public Rogoff-Reinhart kerfuffle has focused on what is not true. This column reviews the evidence on what is true. It suggests that the debt-growth link is more complex than commonly thought. While there is evidence that public debt is negatively correlated with economic growth, there is no study that makes a strong case for a causal relationship going from debt to growth.

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