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CEE and CIS Countries Could be affected by Possible Euro Area Economic Shocks, Albeit to Varying Degrees
The purpose of this report is to assess the potential short- to medium-term effects of further negative economic shocks from the euro area on some economies in Central and Eastern Europe (CEE) and the Commonwealth of Independent States (CIS). We examine three possible channels of transmission – trade, foreign direct investment and bank flows –by using the econometric technique of Vector Auto Regression (VAR). We conclude that economies in the CEE and, to a lesser extent, in the EU's Eastern Neighbourhood could potentially be negatively affected by further economic stress emanating from the euro area, given the numerous linkages and therefore also transmission channels between these economies and the euro area.
№9(69), 2012