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Financial constraints in transition countries: The recent experience
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Newcastle Discussion Papers in Economics
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The paper analyses recent firm data covering the period at the beginning of the current financial crisis in transition countries. The focus of the paper is on credit constraints and their impact on 28 Eastern European (CEE) and Former Soviet Union (CIS) countries. The highest percentage of credit constrained firms is found higher in the CIS (25%) than in the CEE (10%) and these constraints have an effect on firm investment in fixed assets, employment growth, spending on R&D and the introduction of new products. In comparison with earlier results presented in Radulescu (2009) it appears that credit constraints are continuing to fall overall. There is a clear fall in the percentage of constrained firms in CEE, where the most advanced reformers are situated. By comparison the results are less clear in CIS, where reform of the banking system has stagnated. The figures suggest that the financial crisis, at least in the early stages has not increased the percentage of firms affected by credit constraints.
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