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Cost And Benefits Of Czech Economic Transformation: Macroeconomic Approach

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  • Adam KUČERA
  • Aleš MARŠÁL

Abstract

The paper evaluates costs and benefits related to the transformation of the Czech economy. As an alternative approach to the frequently used accounting-based view, a macroeconomic method is utilized which identifies costs and benefits of the transformation in its impact on the domestic product growth rate. The analysis itself follows econometric estimates of relationships between the growth rate of an economy and an occurrence of a transition reform. These estimates, which are gathered from the relevant literature, are then applied to the Czech case, which allows obtaining explicit values of costs and benefits related to the transformation process. Results show that, in the short run, the transformation brought costs of hundreds billion Czech Koruna (CZK), measured in the 2005 price level. The total costs are estimated in the range 3300-3400 billion CZK. Nevertheless, the total result of the economic transformation is found to be positive – especially a quick external liberalization of the country reveals to be the most beneficial aspect of the transformation. Contrary, the largest costs are related to the large-scale privatization and the financial sector reforms.

Suggested Citation

  • Adam KUČERA & Aleš MARŠÁL, 2015. "Cost And Benefits Of Czech Economic Transformation: Macroeconomic Approach," Europolity – Continuity and Change in European Governance - New Series, Department of International Relations and European Integration, National University of Political Studies and Public Administration, vol. 9(1), pages 1-23.
    • Handle: RePEc:epl:eplnew:y:2015:v:9:i:1:p:113-135
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    References listed on IDEAS

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    1. Jan Babecky & Tomas Havranek, 2013. "Structural Reforms and Economic Growth: A Meta-Analysis," Working Papers 2013/08, Czech National Bank.
    2. Karsten Staehr, 2005. "Reforms and Economic Growth in Transition Economies: Complementarity, Sequencing and Speed," European Journal of Comparative Economics, Cattaneo University (LIUC), vol. 2(2), pages 177-202, December.
    3. Roxana Radulescu & David Barlow, 2002. "The relationship between policies and growth in transition countries," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 10(3), pages 719-745, November.
    4. Roxana Radulescu & David Barlow, 2002. "The relationship between policies and growth in transition countries," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 10(3), pages 719-745, November.
    5. repec:unu:wpaper:unupb1-2013 is not listed on IDEAS
    6. T. D. Stanley, 2001. "Wheat from Chaff: Meta-analysis as Quantitative Literature Review," Journal of Economic Perspectives, American Economic Association, vol. 15(3), pages 131-150, Summer.
    7. Jan Hanousek & Libor Krkoška, 1997. "Price liberalization in the czech republic: shock therapy versus gradualism," Prague Economic Papers, Prague University of Economics and Business, vol. 1997(3).
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