Financial contagion reloaded: the case of Cyprus

Iulia Oehler-Şincai

MPRA Paper from University Library of Munich, Germany

Abstract: In the present case study, our main objective is to bring to the forefront the main factors that led to the double-dip recession of the Cypriot economy. We analyze determinants such as “tax haven” status, interlinks with the Greek economy, spillovers originating in the Euro Area as a whole (through the debt crisis) and Greece in particular. In spite of the fiscal reform of 2002 and the new fiscal system in force since the 1st of January 2003, Cyprus continued to be a “tax haven”. Its high investment attractiveness spurred the “Cyp-Rus” relations, boosted an outsized banking sector (representing 800% of Cyprus GDP in 2010-2011) and generated an unsustainable proportion between the real and the “virtual” economy. Besides, the public sector became larger than required by such a small economy, its share in the total yearly value added being close to one quarter. Taking into consideration all these factors, we conclude that the „W”-shaped recession of the Cypriot economy is a sui generis one and the questioning of its “fiscal paradise” status is even more acute than in the case of countries such as Luxembourg or Liechtenstein.

Keywords: Cyprus; financial contagion; tax haven; Cyp-Rus; Cyprus-Greece; recession; euro zone; debt crisis (search for similar items in EconPapers)
JEL-codes: E44 F21 F33 F44 H81 (search for similar items in EconPapers)
Date: 2013-05
New Economics Papers: this item is included in nep-eec and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Published in Global Economic Observer 1/2013.1(2013): pp. 66-74

Downloads: (external link)
https://mpra.ub.uni-muenchen.de/48214/1/MPRA_paper_48214.pdf original version (application/pdf)

Related works:
Journal Article: FINANCIAL CONTAGION RELOADED: THE CASE OF CYPRUS (2013)
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:pra:mprapa:48214

Access Statistics for this paper

More papers in MPRA Paper from University Library of Munich, Germany Ludwigstraße 33, D-80539 Munich, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Joachim Winter ().