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Stabilization and Growth in Transition Economies: The Early Experience

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  • S. Fisher
  • R. Sahay
  • C. A. Vegh

Abstract

This paper analyzes the growth and stabilization experience in 26 transition economies in eastern Europe, the former Soviet Union, and Mongolia for the period 1989-1994. Inflation rates have declined significantly in most countries following an inflation stabilization program. Growth resumes after stabilization occurs, typically with a lag of about two years. Reducing inflation thus appears to be a precondition for growth. An econometric analysis of the short-run determinants of inflation and growth illustrates the key roles of fixed exchange rates, improved fiscal balances, and structural reforms in spurring growth and lowering inflation, and confirms that inflation stabilization programs have been beneficial for growth even after controlling for structural reforms.

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Bibliographic Info

Article provided by N.P. Redaktsiya zhurnala "Voprosy Economiki" in its journal Voprosy Economiki.

Volume (Year): 5 (1997)
Issue (Month): ()
Pages:

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Handle: RePEc:nos:voprec:1997-05-0186

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Web page: http://www.vopreco.ru/eng/year.html

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  1. Philippe Aghion & Olivier J. Blanchard, 1994. "On the Speed of Transition in Central Europe," NBER Chapters, in: NBER Macroeconomics Annual 1994, Volume 9, pages 283-330 National Bureau of Economic Research, Inc.
  2. Rebelo, S. & Vegh, C.A., 1995. "Real Effects of Exchange-Rate-Based Stabilization: An Analysis of Competing Theories," RCER Working Papers 405, University of Rochester - Center for Economic Research (RCER).
  3. Thomas J. Sargent, 1981. "The ends of four big inflations," Working Papers 158, Federal Reserve Bank of Minneapolis.
  4. Castanheira, Micael & Roland, Gerard, 2000. "The Optimal Speed of Transition: A General Equilibrium Analysis," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 41(1), pages 219-39, February.
  5. Alan Gelb & Gary Jefferson & Inderjit Singh, 1993. "Can Communist Economies Transform Incrementally? The Experience of China," NBER Chapters, in: NBER Macroeconomics Annual 1993, Volume 8, pages 87-150 National Bureau of Economic Research, Inc.
  6. Ratna Sahay & Carlos A. Vegh, 1996. "Inflation and stabilization in transition economies: An analytical interpretation of the evidence," Journal of Economic Policy Reform, Taylor & Francis Journals, vol. 1(1), pages 75-108.
  7. Carlos A. Végh, 1992. "Stopping High Inflation: An Analytical Overview," IMF Staff Papers, Palgrave Macmillan, vol. 39(3), pages 626-695, September.
  8. Bruno, Michael & Easterly, William, 1995. "Inflation crises and long-run growth," Policy Research Working Paper Series 1517, The World Bank.
  9. Kornai, J., 1993. "Transformational Recession; A General Phenomenon Examined Through the Example of Hangary's Development," Harvard Institute of Economic Research Working Papers 1648, Harvard - Institute of Economic Research.
  10. Stanley Fischer & Alan Gelb, 1991. "The Process of Socialist Economic Transformation," Journal of Economic Perspectives, American Economic Association, vol. 5(4), pages 91-105, Fall.
  11. Stanley Fischer, 1994. "Russia and the Soviet Union Then and Now," NBER Chapters, in: The Transition in Eastern Europe, Volume 1, pages 221-258 National Bureau of Economic Research, Inc.
  12. Sachs, J.D. & Woo, W.T., 1994. "Structural Factors in the Economic Reforms of China, Eastern Europe and the Former Soviet Union," Papers 94-01, California Davis - Institute of Governmental Affairs.
  13. Philippe Aghion & Olivier Jean Blanchard, 1994. "On the Speed of Transition Central Europe," NBER Working Papers 4736, National Bureau of Economic Research, Inc.
  14. Yavlinsky Grigory & Braguinsky Serguey, 1994. "The Inefficiency of Laissez-Faire in Russia: Hysteresis Effects and the Need for Policy-Led Transformation," Journal of Comparative Economics, Elsevier, vol. 19(1), pages 88-116, August.
  15. Alan Gelb & Gary Jefferson & Inderjit Singh, 1993. "Can communist economies transform incrementally? The experience of China," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 1(4), pages 401-435, December.
  16. De Gregorio, Jose, 1993. "Inflation, taxation, and long-run growth," Journal of Monetary Economics, Elsevier, vol. 31(3), pages 271-298, June.
  17. Cohen, Daniel, 1995. "The Transition in Russia: Successes (Privatization, Low Unemployment...) and Failures (Mafias, Liquidity Constraints...). A Theoretical Analysis," CEPR Discussion Papers 1224, C.E.P.R. Discussion Papers.
  18. de Melo, Martha & Denizer, Cevdet & Gelb, Alan, 1996. "From plan to market : patterns of transition," Policy Research Working Paper Series 1564, The World Bank.
  19. Fischer, Stanley, 1993. "The role of macroeconomic factors in growth," Journal of Monetary Economics, Elsevier, vol. 32(3), pages 485-512, December.
  20. Kent Osband, 1991. "Index Number Biases During Price liberalization," IMF Working Papers 91/76, International Monetary Fund.
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