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Growth and Crisis in Transition: A Comparative Perspective

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  • Fabrizio Coricelli
  • Mathilde Maurel

Abstract

The paper provides an empirical analysis of the growth performance of transition countries in a comparative perspective, separating episodes of crises from those of growth. Performance is measured by the output response following recessions, rather than average rates of growth that aggregate periods of recessions and periods of growth. Results highlight significant differences between transition and non-transition countries, and heterogeneity within the transition group. Distinguishing the performance following the so-called "transitional recession" from that of "normal recessions", the analysis allows separating the role of initial conditions, pre-transition, from the effects determined by the economic structure that emerged after the launch of market reforms. The post-recession behavior of output in Central-Eastern Europe resembles that of emerging and developing countries in the aftermath of banking and financial crises, often following significant liberalizations. In contrast, the post-crisis performance of CIS countries resembles the output response observed during episodes of civil wars, and remains significantly different from the normal response of an average market country. Therefore, the ability to rebound after a crisis is a key element of the growth performance of different transition countries. Furthermore, we distinguish three components of the growth performance associated to a crisis, namely the capacity to rebound, the depth and the lenght of the crisis. We observe that such performance depends on economic reforms and especially on the complementarities among different reforms.

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Bibliographic Info

Article provided by Wiley Blackwell in its journal Review of International Economics.

Volume (Year): 19 (2011)
Issue (Month): 1 (02)
Pages: 49-64

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Handle: RePEc:bla:reviec:v:19:y:2011:i:1:p:49-64

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References

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  1. Oliveira Martins, Joaquim & De Macedo, Jorge Braga, 2008. "Growth, Reform Indicators and Policy Complementarities," Economics Papers from University Paris Dauphine 123456789/7960, Paris Dauphine University.
  2. Nauro F. Campos & Abrizio Coricelli, 2002. "Growth in Transition: What We Know, What We Don't, and What We Should," Journal of Economic Literature, American Economic Association, vol. 40(3), pages 793-836, September.
  3. Abdul Abiad & Enrica Detragiache & Thierry Tressel, 2010. "A New Database of Financial Reforms," IMF Staff Papers, Palgrave Macmillan, vol. 57(2), pages 281-302, June.
  4. Campos, Nauro F & Coricelli, Fabrizio, 2009. "Financial Liberalization and Democracy: The Role of Reform Reversals," IZA Discussion Papers 4338, Institute for the Study of Labor (IZA).
  5. Babetskii, Ian & Campos, Nauro F, 2007. "Does Reform Work? An Econometric Examination of the Reform-Growth Puzzle," IZA Discussion Papers 2638, Institute for the Study of Labor (IZA).
  6. Giavazzi, Francesco & Tabellini, Guido, 2004. "Economic and Political Liberalizations," CEPR Discussion Papers 4579, C.E.P.R. Discussion Papers.
  7. Chadha, Bankim & Coricelli, Fabrizio, 1997. "Fiscal constraints and the speed of transition," Journal of Development Economics, Elsevier, vol. 52(1), pages 221-249, February.
  8. Christiansen, Lone & Schindler, Martin & Tressel, Thierry, 2013. "Growth and structural reforms: A new assessment," Journal of International Economics, Elsevier, vol. 89(2), pages 347-356.
  9. Valerie Cerra & Sweta C. Saxena, 2005. "Growth Dynamics: The Myth of Economic Recovery," Macroeconomics 0508008, EconWPA.
  10. Nicola Cetorelli & Michele Gambera, 1999. "Banking Market Structure, Financial Dependence and Growth: International Evidence from Industry Data," Center for Financial Institutions Working Papers 00-19, Wharton School Center for Financial Institutions, University of Pennsylvania.
  11. Stephen L. Parente & Edward C. Prescott, 2004. "A unified theory of the evolution of international income levels," Staff Report 333, Federal Reserve Bank of Minneapolis.
  12. Campos, Nauro F & Hsiao, Cheng & Nugent, Jeffrey B, 2006. "Crises, What Crises?," CEPR Discussion Papers 5805, C.E.P.R. Discussion Papers.
  13. Pitlik, Hans & Wirth, Steffen, 2003. "Do crises promote the extent of economic liberalization?: an empirical test," European Journal of Political Economy, Elsevier, vol. 19(3), pages 565-581, September.
  14. Allan Drazen & William Easterly, 2001. "Do Crises Induce Reform? Simple Empirical Tests of Conventional Wisdom," Economics and Politics, Wiley Blackwell, vol. 13(2), pages 129-157, 07.
  15. Jason Furman & Joseph E. Stiglitz, 1998. "Economic Crises: Evidence and Insights from East Asia," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 29(2), pages 1-136.
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Citations

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Cited by:
  1. Kearney, Colm, 2012. "Emerging markets research: Trends, issues and future directions," Emerging Markets Review, Elsevier, vol. 13(2), pages 159-183.
  2. Kalyvitis, Sarantis & Vlachaki, Irene, 2012. "When does more aid imply less democracy? An empirical examination," European Journal of Political Economy, Elsevier, vol. 28(1), pages 132-146.
  3. Jesus Crespo Cuaresma & Miroslava Havettova & Martin Labaj, 2012. "Income convergence prospects in Europe: Assessing the role of human capital dynamics," Department of Economics Working Papers wuwp143, Vienna University of Economics, Department of Economics.
  4. Mathilde Maurel & Gunther Schnabl, 2011. "Keynesian and Austrian Perspectives on Crisis, Shock Adjustment, Exchange Rate Regime and (Long-Term) Growth," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00565231, HAL.
  5. Katerina Smídková & Jan Babecky & Ales Bulir, 2010. "Sustainable Real Exchange Rates in the New EU Member States: What did the Great Recession Change?," IMF Working Papers 10/198, International Monetary Fund.
  6. Bicaba, Zorobabel T., 2011. "Do financial reforms complementarity and reforms sequence matter for international capital inflows?," Proceedings of the German Development Economics Conference, Berlin 2011 12, Verein für Socialpolitik, Research Committee Development Economics.

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