For an economist interested in examining the evolution of monetary and exchange rate regimes, Central, Eastern and Southeastern Europe (CESEE) provides a habitat of unparalleled diversity. Almost every type of regime can be found in the region: from floating and inflation targeting over various pegs to the unilateral use of the euro and full euro area membership.
Inflation has been falling sharply across Europe since 2012 (see Charts 1 and 2). Across Central and Eastern Europe (CEE), inflation expectations have also drifted down especially among countries who peg their currencies to the euro (Bulgaria, Croatia, as well as Lithuania, which adopted the euro on January 1, 2015), but also in those that target their inflation rate (the Czech Republic, Hungary, Poland, and Romania).
The recent drop in world oil prices has re-ignited the debate about good vs. bad disinflation. For the euro area, risks from low inflation have been discussed in the March 2014 iMFdirect post. Our blog examines the causes and potential consequences of falling inflation from the perspective of EU countries outside the euro zone.
Central, Eastern, and South-Eastern Europe: Safeguarding the Recovery as the Global Liquidity Tide Recedes
(Version in Türk)
Growth is gathering momentum in most of Central, Eastern, and South-Eastern Europe (CESEE) in the wake of the recovery in the euro area. Excluding the largest economies—Russia and Turkey—the IMF’s latest Regional Economic Issues report projects the region to grow 2.3 percent in 2014, almost twice last year’s pace. This is certainly good news.
What has been the role of foreign banks in financing growth and convergence in Central, Eastern and Southeastern Europe, and how is that role changing? This is discussed in the first issue of a new series of analytical work on the region called Regional Economic Issues, which we launched at a joint IMF/Czech National Bank conference two weeks ago in Prague.