ECONOMIC GROWTH AND TOTAL FACTOR PRODUCTIVITY IN CENTRAL AND EASTERN EUROPEAN COUNTRIES BETWEEN TWO GLOBAL CRISES AND BEYOND

Abstract

The aim of the article is to assess the factors of economic growth of the CEE countries over the 30-year history, the productivity of capital and human resources, the resilience of these countries to the negative impact of the global financial crisis. Methodology. The Solow growth model was used to estimate the growth rates of capital, labor and total factor productivity (TFP). The impact of macroeconomic indicators on GDP and TFP growth is assessed. The group of Central and Eastern European countries that joined the European Union was chosen for the analysis: Bulgaria, Romania, Poland, Hungary, Czech Republic, Slovakia, Slovenia, Estonia, Lithuania, Latvia, as well as post-Soviet European countries: Ukraine, Belarus, Russia and Moldova and Albania in the period from 1991 to 2019. Results. TFP makes a significant contribution to the economic growth of CEE countries. During the period of market reforms, TFP significantly decreased, and during the boom of 2000-2008 it fully ensured the growth of the CEE economies, after the crisis of 2008, the contribution of TFP decreased by 2 times. In the conditions of recovery, TFP growth is positively influenced by inflation, negative CA balance, and unemployment reduction. In the post-crisis period, a decrease in inflation, a positive CA balance, and an increase in unemployment had a positive impact on TFP growth. During a depression, the influence of capital becomes dominant. Restrictive monetary policy contributes to the efficiency of CEE economies. In the short run, unemployment increases, but in the long run it decreases significantly due to the growth of investment and exports. Practical implications. The analysis makes it possible to identify effective macroeconomic policies to stimulate the productivity of the economies of Central and Eastern Europe during the period of economic recovery and depression. Value/originality. A long-term study of the economic performance of CEE countries using the Solow methodology has revealed the behavior of total factor productivity in different periods of modern economic history and its contribution to economic growth.