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Reforms and growth in transition: re-examining the evidence

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  • Elisabetta Falcetti

    () (European Bank of Reconstruction and Development)

  • Tatiana Lysenko

    (European Bank of Reconstruction and Development)

  • Peter Sanfey

    () (European Bank of Reconstruction and Development)

Abstract

A positive link between progress in market-oriented reforms and cumulative growth has been recorded across transition countries. Some less reform-minded countries, however, have also grown strongly in recent years. This paper examines whether there is a robust causal impact of reforms on growth, and whether there are important feedback influences from growth to reform. Strong evidence has been found for both effects. Progress in transition in one period can significantly affect growth in the subsequent period, and this growth can act as an immediate spur to further reform. While the importance of initial conditions as a determinant of growth has declined over time, fiscal surpluses are positively associated with higher growth. Other factors such as recovery, oil prices and external growth also drive growth to some extent but do not mitigate the importance of reforms. These results still hold when one controls for the influence of the current level of output on future growth.

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Bibliographic Info

Paper provided by European Bank for Reconstruction and Development, Office of the Chief Economist in its series Working Papers with number 90.

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Length: 27 pages
Date of creation: Jun 2005
Date of revision:
Publication status: Published in E. Falcetti, T. Lysenko and P. Sanfey (2006), Journal of Comparative Economics, 34(3), pp. 421-445.
Handle: RePEc:ebd:wpaper:90

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Keywords: transition; structural reforms; economic growth.;

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Citations

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Cited by:
  1. Ariane TICHIT MINISCLOUX & Jan FIDRMUC, 2008. "Mind the Break! Accounting for Changing Patterns of Growth during Transition," Working Papers 200818, CERDI.
  2. Piritta Sorsa, 2006. "Macroeconomic Challenges with EU Accession in Southeastern Europe: An Overview," IMF Working Papers 06/40, International Monetary Fund.
  3. Rajjev K. Goel, 2011. "Determinants of economic growth in BRIC countries," Development Research Working Paper Series 05/2011, Institute for Advanced Development Studies.
  4. Thomas Apolte, . "Democracy and Prosperity in two Decades of Transition," Working Papers 200106, Institute of Spatial and Housing Economics, Munster Universitary.
  5. Kosta Josifidis & Radmila Dragutinović Mitrović & Olgica Ivančev, 2012. "Heterogeneity of Growth in the West Balkans and Emerging Europe: A Dynamic Panel Data Model Approach," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 59(2), pages 157-183, May.
  6. Azim Raimbaev, 2011. "The case of transition economies: what institutions matter for growth?," Journal of Economics and Econometrics, Economics and Econometrics Research Institute (EERI), Brussels, vol. 54(2), pages 1-33.
  7. Garbis Iradian, 2007. "Rapid Growth in Transition Economies: Panel Regression Approach," IMF Working Papers 07/170, International Monetary Fund.
  8. Artur Radziwill & Pawel Smietanka, 2009. "EU's Eastern Neighbours: Institutional Harmonisation and Potential Growth Bonus," CASE Network Studies and Analyses 0386, CASE-Center for Social and Economic Research.
  9. Igor Pelipas & Alexander Chubrik, 2008. "Market Reforms and Growth in Post-socialist Economies: Evidence from Panel Cointegration and Equilibrium Correction Model," William Davidson Institute Working Papers Series wp936, William Davidson Institute at the University of Michigan.
  10. Theo Eicher & Till Schreiber, 2006. "Structural Policies and Growth: Time Series Evidence from a Natural Experiment," Working Papers 48, Department of Economics, College of William and Mary.
  11. Rusinova, Desislava, 2007. "Growth in transition: Reexamining the roles of factor inputs and geography," Economic Systems, Elsevier, vol. 31(3), pages 233-255, September.
  12. David Stuckler & Lawrence King & Greg Patton, 2009. "The Social Construction of Successful Market Reforms," Working Papers wp199, Political Economy Research Institute, University of Massachusetts at Amherst.
  13. Alexander Milnikov & Tatiana Papiashvili & Irakli Rodonaia, 2008. "Economic Growth in Georgia: Historical Perspectives and Prognosis," IBSU Scientific Journal, International Black Sea University, vol. 2(1), pages 33-44.
  14. Peter Sanfey & Simone Zeh, 2012. "Making sense of competitiveness indicators in south-eastern Europe," Working Papers 145, European Bank for Reconstruction and Development, Office of the Chief Economist.
  15. Efendic, Adnan & Pugh, Geoff & Adnett, Nick, 2011. "Institutions and economic performance: A meta-regression analysis," European Journal of Political Economy, Elsevier, vol. 27(3), pages 586-599, September.
  16. Azim Raimbaev, 2011. "The case of transition economies: what institutions matter for growth?," EERI Research Paper Series EERI_RP_2011_16, Economics and Econometrics Research Institute (EERI), Brussels.
  17. Apolte, Thomas, 2010. "Democracy and prosperity in two decades of transition," CAWM Discussion Papers 26, Center of Applied Economic Research Münster (CAWM), University of Münster.
  18. Katarzyna Metelska-Szaniawska, 2009. "Constitutions and economic reforms in transition: an empirical study," Constitutional Political Economy, Springer, vol. 20(1), pages 1-41, March.

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