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How I Learned to Stop Worrying and Love the Crisis

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  • Jan Fidrmuc
  • Ariane Tichit

Abstract

We investigate the effects of economic crises on the subsequent economic performance, economic reform, democratization and institutional change. Our analysis is based on a sample of post-communist countries, most of which experienced severe economic crises during the 1990s. We find that the severity of crisis has had a positive impact on the subsequent pace of economic reform, economic growth and, with a delay, on investment and institutional change. Episode of high inflation, moreover, translate into lower subsequent inflation. Crises thus appear to serve as catalysts of reform and institutional change and lead to better long-term economic performance.

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File URL: http://www.cesifo-group.de/portal/page/portal/DocBase_Content/WP/WP-CESifo_Working_Papers/wp-cesifo-2012/wp-cesifo-2012-01/cesifo1_wp3720.pdf
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Bibliographic Info

Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 3720.

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Date of creation: 2012
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Handle: RePEc:ces:ceswps:_3720

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Related research

Keywords: crisis; transition; growth; inflation; reform; institutions;

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  1. Alberto Alesina & Allan Drazen, 1989. "Why are Stabilizations Delayed?," NBER Working Papers 3053, National Bureau of Economic Research, Inc.
  2. Gérard Roland, 2004. "Transition and Economics: Politics, Markets, and Firms," MIT Press Books, The MIT Press, edition 1, volume 1, number 026268148x, December.
  3. Anders Åslund & Peter Boone & Simon Johnson, 1996. "How to Stabilize: Lessons from Post -communist Countries," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 27(1), pages 217-314.
  4. Berta Heybey & Peter Murrell, 1999. "The relationship between economic growth and the speed of liberalization during transition," Journal of Economic Policy Reform, Taylor & Francis Journals, vol. 3(2), pages 121-137.
  5. Fidrmuc, Jan, 2001. "Economic Reform, Democracy and Growth during Post-Communist Transition," CEPR Discussion Papers 2759, C.E.P.R. Discussion Papers.
  6. 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.
  7. Alberto Alesina & Silvia Ardagna & Francesco Trebbi, 2006. "Who Adjusts and When?The Political Economy of Reforms," IMF Staff Papers, Palgrave Macmillan, vol. 53(si), pages 1.
  8. Krueger, Anne O, 1993. "Virtuous and Vicious Circles in Economic Development," American Economic Review, American Economic Association, vol. 83(2), pages 351-55, May.
  9. Fidrmuc, J., 1998. "Political Support for Reforms: Economics of Voting in Transition Countries," Discussion Paper 1998-98, Tilburg University, Center for Economic Research.
  10. Alberto Alesina & Silvia Ardagna & Francesco Trebbi, 2006. "Who Adjusts and When? On the Political Economy of Reforms," NBER Working Papers 12049, National Bureau of Economic Research, Inc.
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