Implications of Globalization on Growing External Debt in Eight Transition Economies
2016
External debt accumulation is a common feature of transition economies during the process of economic
transformation. Insuicient domestic resources and low savings as typical problems in these countries
have to be fulilled through some form of external capital. This chapter analyzes determinants and
trends of external borrowing in eight transition European economies. It is shown that despite a positive
correlation between external debt and economic growth in the initial phases of transition, its further accumulation
is associated to higher risks in terms of macroeconomic stability. This has also been proved
during the recent economic crisis when external debt in most of countries recorded sharp rise. If further
trends of rising external debt accumulation continue, observed economies might face serious economic
problems related to debt repayment and lower growth perspectives.
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