This paper starts by separating the transformational recession (reduction of output in most transition economies in the first half of the 1990s) from the process of economic growth (recovery from the transformational recession) in 28 transition economies (including China,Vietnam and Mongolia). It is argued that the former (the collapse of output during transition) can be best explained as adverse supply shock caused mostly by a change in relative prices after their deregulation due to distortions in industrial structure and trade patterns accumulated during the period of central planning, and by the collapse of state institutions during transition period, while the speed of liberalization, to the extent it was endogenous, i.e. determined by political economy factors, had an adverse effect on performance. In contrast, at the recovery stage the ongoing liberalization starts to affect growth positively, whereas the impact of pre-transition distortions disappears. Institutional capacity and reasonable macroeconomic policy, however, continue to be important prerequisites for successful performance.
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Paper provided by Center for Economic and Financial Research (CEFIR) in its series Working Papers with number
w0068.
Length: 35 pages Date of creation: Aug 2006 Date of revision: Handle: RePEc:cfr:cefirw:w0068
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References listed on IDEAS Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
Atkeson, Andrew & Kehoe, Patrick J, 1996.
"Social Insurance and Transition,"
International Economic Review,
Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 37(2), pages 377-401, May.
Other versions:
Gérard Roland & Thierry Verdier, 1999.
"Transition and the output fall,"
The Economics of Transition,
The European Bank for Reconstruction and Development, vol. 7(1), pages 1-28, March.
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