Assessing Macroeconomic Vulnerability in Central Europe

Libor Krkoska

Post-Communist Economies, 2001, vol. 13, issue 1, 41-55

Abstract: The Central European transition-accession countries Have experienced several periods of macroeconomic vulnerability since the end of output declines in the early 1990s. Some notable periods, which resulted in a necessity to implement extensive stabilisation measures, are March 1995 in Hungary, May 1997 in the Czech Republic and September 1998 in the Slovak Republic. This article shows that the standard early warning indicators provided useful information on macroeconomic vulnerability prior to the crises in Central Europe, although this information had been mainly indicative; that is, early warning indicators would not have allowed one to predict the crises and their timing. However, the growing gap between current account deficit and foreign direct investment (FDI) in all the countries analysed did provide clear early warning of subsequent economic turbulence.

Date: 2001
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DOI: 10.1080/14631370020031504

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