Vulnerabilities in Emerging Southeastern Europe—How Much Cause for Concern?

International Monetary Fund

No 2007/236, IMF Working Papers from International Monetary Fund

Abstract: While large inflows of capital into Southeastern Europe (SEE) have raised incomes, this has increased vulnerability to financial risks, which, if realized, can lead to costly adjustments. Traditional vulnerability indicators in SEE have reached levels that in other countries have not been sustainable, and sectoral analysis shows rising imbalances and raises questions about efficient use of the inflows. While factors related to EU integration mitigate these vulnerabilities, weaker institutions reduce these benefits in SEE compared to more advanced European emerging markets. To insure against setbacks to income convergence, SEE policymakers should take measures to reverse the buildup of vulnerabilities.

Keywords: WP; foreign currency; balance sheet; SEE country; EU integration; exchange rate; parent bank (search for similar items in EconPapers)
Pages: 44
Date: 2007-10-01
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Citations: View citations in EconPapers (11)

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