Economic Fluctuations in Central and Eastern Europe. The Facts

Abstract

This paper provides a detailed empirical analysis of quarterly frequency dynamics in macroeconomic aggregates in twelve countries of Central and Eastern Europe. It shows that business fluctuations in CEE countries are in general more pronounced than in developed ones, and are of similar size as in other emerging market economies. Private consumption is particularly volatile. Relative to major developed economies government spending is dominantly procyclical, and net exports are strongly countercyclical. The most frequent country outliers are the high inflation countries of Bulgaria, Romania and Russia, especially in labor market, price and exchange rate variables. Excluding these countries from the sample makes many of the observed patterns in cyclical dynamics more homogenous, and broadly similar to ones established in developed economies.