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Stabilization and Growth in Transition Economies: The Early Experience

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  • Stanley Fischer
  • Ratna Sahay
  • Carlos A. Vegh

Abstract

The authors analyze the growth and stabilization experience in twenty-six transition economies in Eastern Europe, the former Soviet Union, and Mongolia for the period 1989-94. Inflation rates have declined significantly in most countries following an inflation stabilization program. Typically, stabilization has been followed by growth within two years; and growth does not occur without stabilization. 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.

Suggested Citation

  • Stanley Fischer & Ratna Sahay & Carlos A. Vegh, 1996. "Stabilization and Growth in Transition Economies: The Early Experience," Journal of Economic Perspectives, American Economic Association, vol. 10(2), pages 45-66, Spring.
  • Handle: RePEc:aea:jecper:v:10:y:1996:i:2:p:45-66
    Note: DOI: 10.1257/jep.10.2.45
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    References listed on IDEAS

    as
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    JEL classification:

    • P20 - Economic Systems - - Socialist Systems and Transition Economies - - - General

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