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Debt Service, Foreign Direct Investment and Transformation to Market: A Simple Model

Author

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  • Abel, István
  • Bonin, John

Abstract

In this paper we focus on the macroeconomic framework for the transformation of the formerly socialist economies of Central Europe into capitalist mixed market economies. We construct a simple model to compare the situations in Hungary and Poland on the eve of the transformation before the new governments were elected. This model is used to evaluate the policies designed to lead the two countries along the road to a market economy. The magnitude of the debt service ratio fundamentally influences the chances for stability, while foreign direct investment has a profound influence on real appreciation of the domestic currency.

Suggested Citation

  • Abel, István & Bonin, John, 1992. "Debt Service, Foreign Direct Investment and Transformation to Market: A Simple Model," CEPR Discussion Papers 625, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:625
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    Citations

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    Cited by:

    1. Artur Dmochowski, 1995. "Foreign direct investment in Central Europe," Intereconomics: Review of European Economic Policy, Springer;ZBW - Leibniz Information Centre for Economics;Centre for European Policy Studies (CEPS), vol. 30(6), pages 305-312, November.

    More about this item

    Keywords

    Debt Service Ratio; Eastern Europe; Economic Transformation; Foreign Direct Investment; Macro;
    All these keywords.

    JEL classification:

    • E63 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Comparative or Joint Analysis of Fiscal and Monetary Policy; Stabilization; Treasury Policy
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • P52 - Political Economy and Comparative Economic Systems - - Comparative Economic Systems - - - Comparative Studies of Particular Economies

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