E32 - Business Fluctuations; CyclesReturn

The paper provides an introduction to the special issue. It shows a sense in which Visegrád and Balkan EU countries are correlated in macroeconomic performance and integrated with the global business cycles. Using inflation rate levels as a starting point to characterize when these countries began their transitions, it shows that after 1996 both real GDP growth and real interest rates move together to a significant degree both with each other and with the US. This provides a background from which to view the paths since the collapse of the Soviet Union that these transition economies have taken. In addition, comparison is made to US money and banking policy, to provide an outline of how this may impact progress in the transition region. A subsequent summary of the other articles in the issue shows an inter-relation in their themes about how Central, Eastern, and Southeast Europe have progressed since 1991, and how these paths may be affected by Western economic policy.
Implications for Central European audience: The paper shows that transition regions can be impacted by international financial integration, including to possible detriment when capital markets are regulated by policy that pushes real interest rates below their natural levels. Negative real interest rate policy since the 2008-2009 financial crisis and again during the Covid crisis may hasten the rise of autocratic democracy and limit social, political, and economic freedom.

Confidence factors play an important role not only in the assessment of business cycles but also in the evaluation of national competitiveness (e.g. the Global Competitiveness report published by the World Economic Forum) due to both using soft data obtained from opinion surveys. The subjective nature of confidence leads to questions about the soundness of such findings. Since the answers from opinion surveys are subjective, the empirical relationship between sentiment indicators and economic variables is not unambiguously established. In these conditions, the results of business surveys and the findings published by competitiveness rankings should not be accepted unconditionally. This paper starts with the comparison of soft data (respondents' sentiment) assessing the quality of institutions among world regions in the Global Competitiveness Report 2017-18. The aim of this paper is to offer a more precise view of the development of economic sentiment in the EU countries, especially in Germany and the Visegrad group countries (the V4). As tools for this description, a business sentiment indicator (ESI) and confidence indicators were applied. For analysis of changes in business sentiment and respondents' confidence, a graphical examination of variables, correlation analysis, changes in standard deviation, changes in countries' ranking, and the comparison of average sentiment (confidence) in the pre-crisis and the post-crisis period were used. Our analysis indicates the equivalent of the so-called halo effect in the pre-crisis period for the V4 (the positive expectation connected with the EU accession) and the deterioration in sentiment and confidence indicators in the post-crisis period.