This paper studies the variable impact of the global economic crisis on the post-communist countries of South East Europe and Turkey. The central question is whether the institutional reforms introduced in the former group of countries during the transition period have improved their ability to cope with external shocks. The transmission mechanisms of the crisis to the region are identified as contractions of credit, foreign direct investment, remittances, and exports, and their variable impact across countries is assessed. The analysis shows that institutional progress (EU integration, transition, governance) had a negative relationship to economic growth in SEE during the crisis period. It concludes that the variable impact of the global crisis on the countries of the region can be explained mainly by their different degrees of integration into the EU and global economy. Institutional reforms that were introduced during the boom period only made countries more internationally integrated and therefore more vulnerable to the impact of the global economic crisis and the more recent crisis of the euro zone. Thus, institutional reforms and improvements in competitiveness appear to be insufficient on their own to insulate such small open economies from negative influences emanating from the external environment.

Source: LSEE Paper on South Eastern Europe - ISSUE 4 - The Variable Impact of the Global Economic Crisis in South East Europe