engleski

The Impact of the Financial Crisis and External Sector Imbalances on the Economic Growth of Central and East European Countries

Financial crisis has resulted in a decline in economic activity and the problems of indebtedness have arisen in many European countries. The CEE countries have based their development both on foreign capital inflows (FDI and portfolio investments) and borrowing. The aim of this paper is to research to what extent the financial crisis has affected the level of external debt and the inflows of FDI in the CEE countries and to find out how these variables influence on the GDP growth. The analysis includes external and internal factors of economic growth. The results of panel data analysis (GMM methodology) show that the increase of shares of external debt in GDP, share of FDI in GDP and current account deficit negatively affect the economic growth, while inflation, budget deficits and openness have a positive effect on the GDP growth in the CEE region.

foreign debt; FDI; CEE; financial crisis

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