The Channels of Contagion in the Global Crisis: The Case of the Southeastern Europe (SEE-7) Countries

Abstract

Prior to the global crisis, the SEE-7 had a strong growth performance through increasing in exports and capital inflows. However, they also, just like developing countries, suffered from the global economic crisis. The purpose of this paper is to analyze through what channels the global crisis had an impact on economic activity of the SEE-7. Initially, we reviewed literature about contagion, including its definitions and its channels. We used panel data regression to analyze the impacts of external variables on GDP. According to empirical findings obtaining from the panel regression results, until the global crisis, the external variables significantly promoted the abilities of their growth. However, the contributions of external variables on their growth rate reduced sharply with the global crisis.