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A New Model for Balanced Growth and Convergence

A New Model for Balanced Growth and Convergence

Achieving Economic Sustainability in CESEE Countries

Edited by Ewald Nowotny, Peter Mooslechner and Doris Ritzberger-Grünwald

This topical book addresses the need for emerging economies in Central, Eastern and South-Eastern Europe to find a new, sustainable growth model that fosters continued convergence with the EU without leading to the build-up of new vulnerabilities.

Chapter 3: Restarting growth in Europe after the Great Recession: CEE versus other countries

Seppo Honkapohja and Iikka Korhonen

Subjects: economics and finance, financial economics and regulation, international economics, money and banking


Our objective is to provide an overview of key issues related to economic growth in Central and Eastern European (CEE) countries following the recent economic downturn. The discussion mainly relies on comparisons with European Union (EU) and euro area countries, sometimes also at amore disaggregated level. We thus assume the perspective of comparative macro economics. We first look back in time and consider the question of convergence in living standards. In particular, did EU membership facilitate convergence by speeding up economic growth in the CEE countries? Are per capita gross domestic product (GDP) levels converging to the EU average, in line with the convergence hypothesis? The broad and quick answer to both questions is yes. Next we look at other variables. One set of issues and variables concerns the behaviour and measurement of macroeconomic balances; these will enable us to check on whether the convergence process is sustainable. In other words, have there been major imbalances in the economic developments?

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