Central and Eastern European countries in the global financial crisis: a typical twin crisis?

Diemo Dietrich, Tobias Knedlik and Axel Lindner

Post-Communist Economies, 2011, vol. 23, issue 4, 415-432

Abstract: This article shows that during the Great Recession banking and currency crises occurred simultaneously in Central and Eastern Europe. Events, however, differed widely from what happened during the Asian crisis that usually serves as the model case for the concept of twin crises. We look at three elements that help to explain the nature of events in Central and Eastern Europe: the problem of currency mismatches, the relation between currency and banking crises and the importance of multinational banks for financial stability. We show that theoretical considerations concerning internal capital markets of multinational banks help us understand what happened on capital markets and in the financial sector of the region. We discuss opposing effects of multinational banking on financial stability and find that institutional differences are the key to understanding different effects of the global financial crisis. In particular, we argue that it matters whether international activities are organised by subsidiaries or by cross-border financial services, how large the share of foreign currency-denominated credit is and whether the exchange rate is fixed or flexible. Based on these three criteria we give an explanation why the pattern of the crisis in the Baltic countries differed markedly from that in Poland and the Czech Republic, the two largest countries of the region.

Date: 2011
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)

Downloads: (external link)
http://hdl.handle.net/10.1080/14631377.2011.622561 (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:taf:pocoec:v:23:y:2011:i:4:p:415-432

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/CPCE20

DOI: 10.1080/14631377.2011.622561

Access Statistics for this article

Post-Communist Economies is currently edited by Roger Clarke

More articles in Post-Communist Economies from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().