CEEC growth projections: Certainly necessary and necessarily uncertain

In this paper we discuss the necessity for an indirect approach to assess the growth and convergence prospects of ten Central and Eastern European countries (CEEC10). Ongoing structural changes in these countries and the recent European Union membership of eight countries in the sample have to be taken into account in growth projections.

Our indirect approach consists of basing growth projections for the CEEC10 on growth equations estimated for the incumbent EU member states. The study improves upon current practice in two ways. First, growth equations are estimated for the EU14 and not on a large heterogeneous panel that includes many countries unrelated to the CEEC10. Second, by means of a variety of equations and scenarios we assess the uncertainty inherent in such projections.

We present growth-rate and convergence time distributions. The mean convergence times are in line with previous findings. The growth-rate and convergence time distributions are bi-modal, reflecting the possibility of two distinct growth paths, depending upon economic policy choices.