7. Central and Eastern Europe: Financial Markets and Private Capital Flows

Abstract

The resurgence of private capital flows to developing countries beginning in the late 1980s did not initially benefit the countries of Central and Eastern Europe. With the collapse of Communist governments throughout the region beginning in 1989 most countries in the region were absorbed in a political and economic upheaval unimaginable only years earlier. Today, while the amount of private capital entering Central and Eastern Europe is still a very small fraction of that provided to all developing countries, it has nonetheless begun to flow in. Whereas the countries in Central and Eastern Europe as a group were running capital account deficits in the early 1990s, this situation turned around beginning in 1992, as reform programs in a number of countries started to take hold.