Research Paper used for Research Methods

7/25/2019 Research Paper used for Research Methods

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Qafqaz University

Financial Crisis in Greece and its impact on Western Balkan Countries

Student: Bunyamin Mustafa

Student number: 130214010

Lecturer: Peyman Almasov

Baku 2016

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Abstract

Financial crisis and economic downturn still breed distress for Western Balkan

countries and Europe as a group. It is observed that when the economies of these

countries get out of worldwide financial depression, another disaster scarce the one.Certainl!, a significant amount of the financial sector of the corresponding countries is

mostl! related to Greek resources and funds, and the financial harmon! among them is

comparativel! e"cessive. #ence, the main ob$ective of this paper is to e"amine the effect

of the financial crisis in Greece to the Western Balkans countries. %o show this effect,

paper is used macroeconomic indicators and e"amines relationship for the sample

countries. %he paper is concluded b! discussing solutions on the influence of the

spreading effect on the some polic! makers. It also ensures an interesting methodolog! to

an e"isting dispute, having engaged attention as regards the effect on nearb! countries.

#ow the debt crisis problem is controlled b! particular institutions and the European&nion and which tactics and policies are monitored for crisis reduction are anal!ed too.

Key words:Financial crisis, Western Balkan, Greece, policies, European &nion,

macroeconomic indicators

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Table of Content

Abstract 2

List of abbreiations.... 4

!ntroduction. 5

Research uestion... !

Metho"olo#y....... !

. $tructure. !

"art 1 ### %

&conomic an" 'inancial (evelo)ment in the *estern Bal+an

,ountries. %

Real -(P -roth %

/nem)loyment rate ..

Account Balance .....

Bu"#et (eficit ..............................................

(et ,risis in -reece an" $trate#ies for Re"uction ,risis..

Conclusion #.......... 10

Tables and C$arts 11

Biblio%ra&$y..... 13

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List of abbreiations:

'RM 'ormer u#oslav Re)ulic of Mace"onia

-(P -ross (omestic Pro"uct

M' nternational Monetary 'un"

,,&6 ,an"i"ate ,ountries7 &conomic 6uarterly

B8 Bosnia an" 8er9e#ovina

*& *orl" &conomic utloo+

&BR( &uro)ean Ban+ for Reconstruction an" (evelo)ment

B$ Ban+ for nternational $ettlements

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'We are going to destro! the basis upon which the! (E&) have

built for decade after decade a s!stem, a network that viciousl!

e"ploits the energ! and the economic power from ever!bod! else in

societ!.'

Yanis Varoufakis, ex Minister of Finance of Greece

!'T()*+CT!)'

After a )erio" of )er)etual economic )ro#ress an" #roth the financial chaos that los

in the a"vance" economies affecte" the economies of "evelo)in# countries inclu"in# the

*estern Bal+ans1.n 200 all *estern Bal+an countries e;)erience" recession e;clu"in#

Alania an"


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ein# more "is)ose" to ne;t sta#es of "et )rolems5. ?his may cause su))lementary economic

"ifficulties to the *estern Bal+an countries )articularly to Alania hich has a com)aratively

hi#h economic interaction ith taly as the transfer of fun"s y emi#rants in taly ensure a

source of revenue for a #reat numer of )o)ulation!.

?his )a)er see+s to "iscuss the uestion of ?o hat e;tent financial crisis in -reece ha"im)acte" on main macroeconomic relation an" in"icators of *estern Bal+an ,ountries

,et$odolo%y

?he metho"olo#y of the )a)er is ase" on uantitative analyses of financial crisis in

-reece an" its im)act on *estern Bal+an ,ountries. m)act of the -ree+ crisis an" euro 9one all

to#ether is li+ely to "iffer consi"eraly amon# *estern Bal+an countries "e)en"in# on the

"omestic economic con"ition an" on their sectors7 construction%. ?hese "ifficulties that arise

from result of the "et crisis hint at the nee" for )rom)t res)onse inventively an" "efinitely

throu#h macroeconomic )olicies. ?hus this )a)er analyses the im)act of the current -ree+ crisis

on the countries of the *estern Bal+ans. ?o analyses this effect outlinin# macroeconomic "ata

for the sam)le countries is measure" in this research )a)er. ?he )a)er is conclu"e" y "iscussin#

solutions on the im)act of this effect on the )art of )olicy ma+ers. ?he )a)er ensures an

interestin# metho"olo#y to a current concern havin# involve" little attention in terms of the

s)rea" effect on neary countries.

Structure

?he )a)er is "esi#ne" in five sections. ?he first section illuminates some )reliminary

facts that illustrate the *estern Bal+an economies. ?he secon" section e;)resses the economic

im)rovement an" #roth of the *estern Bal+an countries efore an" "urin# the crisis y #ivin#

an" analy9in# fi#ures an" "ata on +ey macroeconomic in"icators such as -(P #roth

unem)loyment rate an" current account alance an" u"#et "eficit. ?he thir" section "iscourses

in rief the )olicies that are im)lemente" y corres)on"in# authorities s)ecifically the &uro)ean

< The 5ew $ork Ti.es, Aril = 271>toics)nti.es)co.>to>reference>ti.estoics>sub-ects)

; 8bid

6 "a.insk +, ?izondo (, %einhart ! 91@@= ?eading indicators for currenc crisis)

(ta aers8nt 'onetar #und 4


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/nion an" the nternational Monetary 'un" =M'> for the miti#ation of the crisis. ?he fourth

section illustrates the em)irical fin"in#s that arise from our analyses an" research hile in the

last section the conclusions of )a)er are #iven ith anserin# main oCective uestion aove an"

recommen"ation for future )olicies.

"art 1

-conomic and .inancial *eelo&ment in t$e /estern Balkan Countries

*eal G+ in Western Balkan Countries

?he *estern Bal+an countries achieve" a stron# economic )ro#ress efore the financial

crisis in 200. ?he #roth rate reache" !.5 @ in 200%ut toar" the en" of 200 the #loal

financial crisis influence" the corres)on"in# economies. As res)ect to the Alanian economy the

crisis as )asse" on throu#h numerous ays causin# a stron# sloin# "on of the economic

#roth from @ to 3.3 @ in 200 re#ar"less of the event that Alania is rare economy in

&uro)e that continue" ith a still )ositive real -(P #roth "urin# the crisis. ?he Re)ulic of


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)rove" this hen e loo+ at 'i#.1 a#ain. &stimates on #roin# ha" een stu"ie" nearly in all

Bal+an countries. ,ountries hose "evelo)ment or evolution is "e)en"ent on e;)orts ill suffer

more as in 200 hen the #loal financial crisis influence" the economies of these countries11.

*hen the real -(P shos minor si#ns of the euro 9one crisis the financial sector ca)ital

flos an" len"in# in"icators sho orryin# )ro)ortions12. ?he real cre"it has een slo "on)re"ominantly in ,roatia an" 'RM.

?he financial sector in the *estern Bal+an countries is mainly controlle" y the an+in#

system an" it has )oerful an" effective role in alancin# the financial systemin total13. (iffer

from the orl"i"e economic crisis here the real sector as ty)ically affecte" an" the financial

system staye" constant no the roles are o))osite as a result of the hi#h level of e;)osure of

these countries to the -ree+ financial system14.?he an+in# system of the *estern Bal+an

countries is e;tremely incor)orate" ith the euro 9one an+s thus these countries are im)resse"

y economic an" financial fluctuations in the -reece an" euro 9one15. ?he onershi) of forei#n

an+s in 200E2012 in Alania Bosnia an" 8er9e#ovina ,roatia an" 'RM reache" morethan 0 @ =see ?ale 1>.

Bac+e an" -ar"o state that an increase in forei#n investors7 ris+ unillin#ness to the

re#ion oul" cause hi#her ris+ )rocee"s hich oul" increase financin# costs or mi#ht even

ma+e arriers to acuire fun"in#1!. ?his oul" result in a "e"uction or su""en rea+ of ca)ital

entries hich oul" mainly affect ne#atively nonfinancial or#ani9ations an" an+s in countries

ith tou#h su))ort on forei#n fun"in#. ?hus the conseuences of the current economic an"

financial crisis ill e felt in the lon# term1%.

11 +reek !risis FDnder.ined Balkan 0D Accession Hoes> 14 Gul 2714>

htt:>>www)balkaninsight)co.>en>article>greekcrisisunder.inedneighborseubids

12 0B%* 9271www)oenb)at>de>i.g>feeiJ271


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&nemplo!ment in Western Balkan countries

?he unem)loyment information shos that the *estern Bal+ans ha" critical

unem)loyment level even efore the crisis1. /nem)loyment rate of all countries that situate inthis re#ion is more than the &/ avera#e of . @. Res)ect to the im)ression of crisis it is

noticeale that some "ifferences eteen countries in the re#ion. ne can say that Alania an"

'RM "i" not seem to )ractice har" conseuences mainly 'RM e;)erience" affirmative

effects throu#h 200F2010 =see 'i#. 2>. Because increasin# the unem)loyment rate y avera#e

1.5 @ Bosnia an" 8er9e#ovina an" Montene#ro shoe" ne#ative effects in 200 an" 20101.

?he laor mar+et as #enerally influence" in ,roatia an" $eria.

-ccount Balance and Budget +eficit of Western Balkan Countries?he account "eficit "iffers amon# countries =see 'i#. 3>20. Accor"in# to that #ra)h it as

i"e in some economies in the first uarter of 2011G for e;am)le in 'RHM an" Bosnia an"

8er9e#ovina it as e;ten"e" aout 1.35 @ hoever in the other economies of the re#ion there

ere not any si#nificant chan#es com)are" to the )rece"in# year.

?he "eclinin# of the u"#et "eficit in 200 e;)resses the im)acts of orl"i"e economic

an" financial crisis on the *estern Bal+an economies. 'or e;am)le it shoe" !. @ in AlaniaG

.0 @ in


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Because e;)orts of most estern Bal+an economies are lo the )ortion of e;)orts to

-reece relative to -(P is also honestly small in nearly all countries in that 9one23. ,onseuently

a )ossile su))lementary "eterioration in e;)orts to -reece oul" not e e;)ecte" to ma+e

suffer for corres)on"in# economies24.

*ebt Crisis in reece and Strate%ies for (eduction Crisis

$trate#ies an" )olicies a))lie" y -ree+ #overnment in )ast 30 years have assiste" to the recent

"et crisis. ?hese strate#ies have cause" the nearly entire "esEin"ustriali9ation of the economy

an" "esertion of the a#ricultural )ro"uction. ?he a#riculture )ro"uction resemles only to 3.3 @

of -(P hile services to %. @ an" in"ustry to 1%. @ of -(P25.

n the time eteen 2001 an" 200 -reece note" u"#et "eficits avera#e" 5 @ )er year

in com)arison to the euro 9one avera#e u"#et "eficit of 2 @ an" in 200 the u"#et "eficit

fun"amentally reache" 15.! @2!. Also its account "eficit avera#e" @ )er year com)are" to

euro 9one avera#e of 1 @. ?hese shorta#es ere s)onsore" y #ettin# loan from international

ca)ital mar+ets face" the country ith tremen"ously hi#h e;ternal "et: 12 @ of -(P in

2002%. *hen the crisis creates a "irect threat to the soli"ity an" stren#th of the &uro)ean

monetary union Brussels interfere" reuestin# the country to im)lementeconomic austerity

)olicy2. After the forces of the &uro)ean /nion authorities an" recommen"ations of a))ro)riate

orl" or#ani9ations such as the M' an" the *orl" Ban+ the #overnment "eclare" ta; increases

an" a 30 @ cut to the 2 month onuses for the )ulic or+ers2. Besi"es this the -ree+

23 +reek !risis FDnder.ined Balkan 0D Accession Hoes, 8bid

24 8bid

2< 'igration and econo.ic crisis: the case of +reece) 8n: !ontribution to the

conference) %e8ntegration centre for .igrant workers, Bucharest, 16 #eb 2714

2;Budget deLcit for Western Balkan !ountries 9(ource: 0D !andidate and re

accession !ountries 0cono.ies Muarterl!!0M 2711

26 8bid

2= NThe (econd 0cono.ic Ad-ust.ent rogra..e for +reece 9#ourth reiew Aril

2714N 9*#) age


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#overnment "eclare" a numer of other actions an" also acce)te" the )ro)osal of euro 9one

countries an" the M' to a 3 year loan )ac+a#e of I110 illion at an interest rate of 5.5 @30. ?he

-ree+ #overnment acce)te" a financial )artnershi) )ro#ram for "ecrease the )ulic "et an"

ensures the structure for "evelo) stren#th an" evolution to the economy. t as e;)ecte" that

-reece7s first re#ulation strate#y com)ose" ith these resources oul" create )rivate ca)ital

mar+ets for -reece y the en" of 2012 ut these e;)ectation miscarrie" hen it as foun" that

this )roce"ure may last more31.

Conclusion

?he main oCective of this research )a)er as to e;amine e;tent of the effects of a

universal crisis an" an ultimate )assin# of the "et crisis on *estern Bal+an countries y

measurin# an" analy9in# main macroeconomic in"icators such as -(P #roth unem)loyment

rate an" current account alance an" u"#et "eficit. ?he )a)er conclu"e" on main research

uestion of ?o hat e;tent financial crisis in -reece ha" im)acte" on main macroeconomic

relation an" in"icators of *estern Bal+an ,ountriesJ that the in"icators such as the share of

local an+ cre"its an" current account "eficit informs that there is a stron# im)act of the

occurrence of a financial crisis in -reece on the *estern Bal+an countries. t as "etermine" y

the current economic an" financial con"itions in orl" es)ecially euro 9one hich is hi#hly

)ossile that there oul" e stron# "onturns in the forthcomin# )erio" in the *estern Bal+an

countries. n this case )ositive si"e is that as a re#ar" #ettin# e;)eriences from )revious

unsuccessful strate#ies an" )olicies there can e of consi"erale value y alloin# )olicyE

ma+ers to acuire clear insi#hts hen an" ho to ta+e )reEem)tive )lans in or"er to re"uce oreven sto) financial chaos.

At lastresearch conclu"e" that an+in# an" financial sector alon# ith the e;ternal

sector as ris+ con"uction ays may e e;tra influence" com)are to real economy sector mostly

in terms of )ossile ea+nesses that coul" ha))en in an o))osin# scenario in countries ith a

stron# e;istent of -ree+ an+s such as Alania 'RM an" $eria.

37 'ichael Winfre and %enee 'altezou, +reeks 'arch to rotest Austerit

!a.aign, Washington ost, Gune 1=, 2711

31 NThe (econd 0cono.ic Ad-ust.ent rogra..e for +reece, 8bid)

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Tables and C$arts

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Biblio%ra&$y

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Alan Beattie M' Poise" to ?a+e Bac+seat Role in -reece RescueJ 'inancial ?imes Kuly 22

2011.

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cause for concern htt):LL.oen.atL"eLim#Lfeei20151stu"ies2tcm14E245%2.)"f

Ban+ for nternational $ettlements =B$> B$ 6uarterly Revie: nternational Ban+in# an"

'inancial Mar+et (evelo)ments Kune 2011

htt):LL.is.or#L)ulLtr)"fLra111!.)"fN)a#eO100.

Bartlet * Prica =2011> ?he variale im)act of the #loal economic crisis in $outh &ast &uro)e.

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Ber# A Borens9tein & MilesiE'erretti -M Pattillo , =1> Antici)atin# alance of )ayment

crisis. ?he role of early arnin# systems ccasional )a)er 1!. M' *ashin#ton (,

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(avis &P ,oul" early arnin# systems have hel)e" to )re"ict the su )rime

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&/ ,an"i"ate an" PreEaccession ,ountries &conomies 6uarterlyE,,&6 =2012E2015>

M' *orl" &conomic utloo+ =*&> =201!> htt):LL.imf.or#Le;ternalL)usLftLeoL2012L01Lin"e;.htm

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Michael *infrey an" Renee Malte9ou -ree+s March to Protest Austerity ,am)ai#nJ*ashin#ton Post Kune 1 2011.

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/$ Ban+ &;)osure to -reece Part 3J ?he $treet i#ht Kune 1% 2011.

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Research Paper used for Research Methods