Dynamics of Financial Crisis and its Effects on Economic Growth in Central Eastern and European Economies
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Date
2017-10-26
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UMT.Lahore
Abstract
The aim of this study is to examine the dynamics of financial crises and its effect on
economic growth in case of CEE economies by using direct effect (using binomial and
continuous indicators) and indirect effect (using mediator approach). In this study panel
data has been taken for the period of 1996 to 2014 and dynamic panel data models (PMG,
MG and DFE) are used for empirical investigation. It is concluded from the econometric
analysis that financial crises, unemployment, population growth and inflation has a
negative and significant impact on economic growth while the relationship between trade
openness and economic growth is positive and significant in case of Central Eastern and
European economies. When the financial crises hit the stable economies it will lead
toward the downsizing in labor markets due to which unemployment rises, inflation
increases which results in lower purchasing power, trade related activities decline which
cause loss of competiveness and population growth become a burden for the economies.
Overall map of economic growth and development go downward when the crises hit the
economies. Results shows that financial crises hit CEE economies drastically and a
balanced growth pattern and better fiscal and monetary policies can be helpful for these
economies in order to avoid such crises in future.