Ivan Krumov Todorov


The objective of this paper is to outline the main macroeconomic trends in the new member countries of the European Union before the Euro Area debt crisis.  In order to achieve this objective, the developments in a wide range of macroeconomic indicators (exchange rates, foreign trade, monetary policy, inflation, price levels, fiscal balances, sovereign debt, GDP, labour productivity, composition of output and current account balances) have been analyzed. The analysis results in recommendations on the macroeconomic policies the new member countries should have implemented under global crisis condition in accordance with the peculiarities of their economies and their specific national priorities.

Full text: PDF


new member countries, macroeconomic trends, global crisis

JEL Codes

F15, F36, E60, F40


Alberola-Ila, E. and Tyrväinen, T., 1998. Is there scope for inflation differentials in EMU? An empirical evaluation of the Balassa-Samuelson model in EMU. Banco de España Working Paper, 9823.

Babetskii, I., 2005. Trade integration and synchronization of shocks: Implications for EU enlargement. Economics of Transition, 13(1), pp. 105-138.

Babetskii, I., Boone, L. and Maurel, M., 2004. Exchange rate regimes and shock asymmetry: the case of the accession countries. Journal of Comparative Economics, 32, pp. 212-229.

Begg, D., Eichengreen, B., Halpern, L., von Hagen, J. and Wyplosz, C., 2003. Sustainable Regimes of Capital Movements in Accession Countries. CEPR Policy Paper, 10.

Buiter, W. and Grafe, C., 2002. Anchor, Float or Abandon Ship: Exchange Rate Regimes for the Accession Countries. European Investment Bank Papers, 7 (2), pp. 51-71.

Burgess R., Fabrizio, S. and Xiao, Y., 2003. Competitiveness in the Baltics in the run-up to EU accession. IMF Country Report, 3 (114),

Chukalev, G., 2002. The Balassa-Samuelson effect in the Bulgarian economy. Working Paper of the Bulgarian Agency for Economic Analysis and Forecasting, p.40.

Cincibuch, M. and Podpiera, J., 2006. Beyond Balassa-Samuelson: real appreciation in tradables and transition countries. Economics of Transition, 14(3), pp. 547-573.

Coricelli, F. and Jazbec, B., 2001. Real exchange rate dynamics in transition economies. Structural Change and Economic Dynamics, 15, pp. 83-100.

Darvas, Z. and Szapáry, G., 2008. Euro area enlargement and euro adoption strategies. European Commission, Economic Papers, 304, February.

De Haan, J., Eijffinger, S. and Waller, S., 2004. The European Central Bank: Credibility, Transparency, and Centralization. Cambridge: MIT Press.

De Haan, J., Inklaar, R. and Jong-a-Pin, R., 2008. Will business cycles in the euro area converge? A critical survey of empirical research. Journal of Economic Survey, 22 (2), pp. 234-273.

Dedola, L. and Lippi, F., 2000. The Monetary Transmission Mechanism: Evidence from the Industries of Five OECD Countries. Banca d’Italia Temi di Discussione, 389.

Égert, B, Drine, I., Lommatzsch, K. and Rault, C., 2003. The Balassa-Samuelson effect in central and eastern Europe: myth or reality. Journal of Comparative Economics, 31, pp. 552-572.

Égert, B., 2002a. Estimating the Balassa-Samuelson effect on inflation and the real exchange rate during the transition. Economic Systems, 26, pp. 1-16.

Égert, B., 2002b. Investigating the Balassa-Samuelson hypothesis in transition: do we understand what we see? A panel study. Economics of Transition, 10, pp. 273-309.

Égert, B., 2003. Assessing equilibrium exchange rates in CEE acceding countries: can we have DEER with BEER without FEER? A critical survey of the literature. Focus on Transition, 2, pp. 38-106.

Égert, B., 2005a. Balassa-Samuelson meets south-eastern Europe, the CIS and Turkey: a close encounter of the third kind? European Journal of Comparative Economics, 2(2), pp. 221-234.

Égert, B., 2005b. The Balassa-Samuelson hypothesis in Estonia: oil shale, tradable goods, regulated prices and other culprits. World Economy, 28 (2), pp. 259-286.

Égert, B., 2007. Real convergence, price convergence and inflation differentials in Europe. CESifo Working Paper, 2127, October.

Égert, B. and Podpiera, J., 2008. Structural inflation and real exchange rate appreciation in Visegrad-4 countries: Balassa-Samuelson or something else? CEPR Policy Insight, 20, April.

Égert, B., Drine, I., Lommatzsch, K. and Rault, C., 2003. The Balassa-Samuelson effect in central and eastern Europe: myth or reality. Journal of Comparative Economics, 31, pp. 552-572.

Égert, B., Halpern, L. and MacDonald, R., 2006. Equilibrium exchange rates in transition economies: taking stock of the issues. Journal of Economic Surveys, 20 (2), pp. 257-324.

European Central Bank, 2005. Economic and Monetary Integration of the New Member States. ECB Occasional Paper Series, 36, September.

European Commission, 1990. One market, one money: An evaluation of the potential benefits and costs of forming an economic and monetary union. European Economy, 44, October.

Fidrmuc, J., 2004. The Endogeneity of the optimum currency area criteria, intra-industry trade, and the EMU enlargement. Contemporary Economic Policy, 22 (1), pp. 1-12.

Fidrmuc, J. and Korhonen, I., 2003. Similarity of supply and demand shocks between the euro area and the CEECs. Economic Systems, 27, pp. 313-334.

Fidrmuc, J. and Korhonen, I., 2004. A meta-analysis of business cycle correlations between the euro area, CEECs, and SEECs – What do we know? Oesterreichische Nationalbank Focus Paper, 2.

Flek, V., Marková, L. and Podpiera, J., 2002. Sectoral productivity and real exchange rate appreciation: much ado about nothing? Czech National Bank Working Paper, 4.

Frankel, J. and Rose, A., 1998. The endogeneity of the optimum currency area criteria. The Economic Journal, 108, pp. 1009-1025.

Golinelli, R. and Orsi, R., 2002. Modelling inflation in EU accession countries: the case of the Czech Republic, Hungary and Poland. In: W. Charmeza, K. Strzala (eds), ed. 2002. East European transition and EU enlargement: a quantitative approach. Berlin: Springer, pp. 267-290.

Halpern, L. and Wyplosz, C., 2001. Economic transformation and real exchange rates in the 2000s: the Balassa-Samuelson connection. Economic Survey of Europe, 1.

Horvath, J. and Ratfai, A., 2004. Supply and demand shocks in accession countries to the economic and monetary union. Journal of Comparative Economics, 32, pp. 202-211.

Kenen, P., 1969. The Theory of Optimum Currency Areas: An Eclectic View. In: R. Mundell, A. Swoboda, ed. 1969. Monetary problems in International Economy. University of Chicago.

Kocenda, E., 2001. Macroeconomic convergence in transition countries. Journal of Comparative Economics, 29, pp. 1-23.

Korhonen, I., 2003. Some empirical tests on the integration of economic activities between the euro area and the accession countries. Economics of Transition, 11(1), pp. 177-296.

Kovács, M., 2002. On the estimated size of the Balassa-Samuelson effect in five central and eastern European countries. MNB Working Paper, 5.

Kovács, M. and Simon, A., 1998. Components of the real exchange rate in Hungary. National Bank of Hungary Working Paper, 3.

Krugman, P., 1993. Lessons of Massachusetts for EMU. In: F. Torres, F. Giavazzi (eds), ed. 1993. Adjustment and growth in the European Monetary Union. Cambridge: Cambridge University Press and CEPR, pp. 241-261.

Lojschova, A., 2003. Estimating the impact of the Balassa-Samuelson effect in transition economies. Institute for Advanced Studies (Vienna) Working Paper, 140.

MacDonald, R. and Wojcik, C., 2004. Catching-up: the role of demand, supply and regulated price effects on the real exchange rates of four accession countries. Economics of Transition, 12, pp. 153-179.

Mihaljek, D. and Klau, M., 2004. The Balassa-Samuelson effect in central Europe: a disaggregated analysis. Comparative Economic Studies, 46, pp. 63-94.

Mihaljek, D. and Klau, M., 2007. The Balassa-Samuelson effect and the Maastricht criteria: revisiting the debate. In N. Batini (ed), ed. 2007. Monetary Policy in Emerging Markets and Other Developing Countries. New York: Nova Science Publishers.

Mihaljek, D. and Klau, M., 2008. Catching-up and inflation in transition economies: the Balassa-Samuelson effect revisited. BIS Working Paper, 270, December, p. 12.

Mihaljek, D. and Klau, M., 2009. Catching-up and inflation in the Baltics and Southeastern Europe: the role of the Balassa-Samuelson effect. OeNB Workshop, 23, March.

Nenovsky, N. and Dimitrova, K., 2002. Dual inflation under the currency board: the challenges of Bulgarian EU accession. William Davidson Institute Working Paper, 487.

Pop, N., Lupu, I., Milea, C., Iordache, F., Moşneanu, E.A., Ionaşcu, S., Criste, A. and Glod, A., 2010. Trends in the New EU Member States. Macroeconomic Policies to Adopt the Euro. Financial Studies, 1, pp. 123-140.

Rother, P., 2000. The impact of productivity differentials on inflation and the real exchange rate: an estimation of the Balassa-Samuelson effect in Slovenia. In: Republic of Slovenia: Selected issues. IMF Staff Country Report, 00/56.

Stoilova, D. and Patonov, N., 2012. Fiscal decentralization: Is it a good choice for the small new member states of the EU?, Scientific Annals of the Alexandru Ioan Cuza University of Iasi, Economic Sciences Section, 59 (1), pp. 125-137.

Szapáry, G, 2000. Maastricht and the choice of the exchange rate regime in the transition countries during the run-up to EMU. National Bank of Hungary Working Paper, 7.

Wagner, M. and Hlouskova, J., 2004. What is really the story with the Balassa-Samuelson effect in the CEECs. University of Bern, Economics Department Discussion Paper, 04/16.