The Euro and Economic Stability
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The Euro and Economic Stability

Focus on Central, Eastern and South-Eastern Europe

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

The Euro and Economic Stability assesses the euro area’s merits as a shelter and the merits of euro assets as a safe haven and reviews the case for rapid euro adoption from a post-crisis view. Policymakers and economists provide relevant lessons from euro area divergences for future euro area members and, more generally, from the financial crisis, while banking representatives discuss post-crisis business models of banks in the area. Last but not least, a theoretical introductory chapter fills the gap between mainstream macroeconomic modelling and real-world decision-making.
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Chapter 14: Overconfidence as a Cause of Crisis: The Case of Ukraine

Vladimir Dubrovskiy


Vladimir Dubrovskiy1 In the ‘post-Lehman’ worldwide economic meltdown, Ukraine was hit hard and lost about 28 per cent of its GDP of Q3 2008 within the next two quarters, or 20.3 per cent year-over-year. The crisis thus wiped out all growth gains made since Q3 2004 whereas the EU-27 was propelled back to 2006, and Latvia back to 2005 levels (see Figure 14.1). At the same time, Ukraine experienced the sharpest currency depreciation in the region: the Hryvnya fell by more than 80 per cent in just three months. Why this sharp setback after the apparently strong performance following posttransition recovery since 2000? Was Ukraine indeed just a victim of the 195.00 EU-27 Ukraine IMF PCI Latvia 175.00 155.00 135.00 115.00 95.00 Sources: For EU and Latvia – Eurostat; for Ukraine – DerzhComStat4 (Ukrainian statistic authority); for the PCI – IMF; Author’s calculations5 Figure 14.1 M2386 - NOWOTNY PRINT.indd 184 00 Q 20 1 00 Q 20 3 01 Q 20 1 01 Q 20 3 02 Q 20 1 02 Q 20 3 03 Q 20 1 03 Q 20 3 04 Q 20 1 04 Q 20 3 05 Q 20 1 05 Q 20 3 06 Q 20 1 06 Q 20 3 07 Q 20 1 07 Q 20 3 08 Q 20 1 08 Q 20 3 09 Q 1 20 Quarterly indexes of GDP growth (Q1, 2000 5 100) for the EU-27, Latvia, and Ukraine in comparison with the IMF’s Primary Commodity Index (PCI) recalculated to Q1,...

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