Abstract
This research offers new insights into the effect of the Global Financial Crisis of 2007–2009 on the countries that used to be part of the Soviet bloc by focusing on a cross-regional comparison. Twenty-eight countries are grouped according to different criteria and the corresponding vulnerability of each group is compared. The research links the variability in the groups’ responses to the dependence on trade with the European Union, the degree of the transition and economic freedom, and the sectoral composition of GDP. The research finds that what is considered to be an advantage for a transition economy during “normal” times -- high degree of economic freedom and trade liberalization, financial system sophistication, and a well-developed service sector -- became a disadvantage during the crisis.
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Notes
CIS includes twelve out of fifteen former Soviet Union Republics -- Armenia, Azerbaijan, Belarus, Georgia, Kazakhstan, Kyrgyzstan, Moldova, Russian Federation, Tajikistan, Turkmenistan, Ukraine, and Uzbekistan – all but the Baltics (Estonia, Latvia, Lithuania).
CEE includes all the Eastern European countries west of post-WWII border with the former Soviet Union, countries of the former Yugoslavia, and the three Baltic states.
Stock market inception was used as a proxy for the starting date.
These are the countries that were independent prior to the transition.
Eastern Commonwealth of Independent States excludes Commonwealth of Independent States of Central Asia and Caucasus.
Financial reforms started during 1989 – 1992.
Financial reforms started during 1993–1996.
Financial reforms started after 1998.
It is important to note that the three Baltic countries retained the trade relations with their Western neighbors even after they were integrated into the Soviet Union. Most of these “trade” transactions, however, were black market activities.
Pearson correlation coefficient is 0.82 (author’s calculations).
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Shostya, A. The Effect of the Global Financial Crisis on Transition Economies. Atl Econ J 42, 317–332 (2014). https://doi.org/10.1007/s11293-014-9418-2
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DOI: https://doi.org/10.1007/s11293-014-9418-2