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Uncertainty and Growth in Transition Economies

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  • Andrej Susjan
  • Tjasa Redek

Abstract

The paper investigates the relationship between fundamental uncertainty, a recurrent theme in post-Keynesian economic literature, and economic performance in transition economies. Uncertainty in the transitional economic environment is enhanced by factors such as institutional transformation, political and social instability, and legacies of the past. To capture the changes in the levels of transition-specific uncertainty, the authors have designed the uncertainty index, based on a weighted selection of Heritage Foundation and Freedom House data. The correlation between the uncertainty index and growth is strong and clearly negative. Panel data analysis based on a growth model, supplemented by variables to simulate transitional cycle, and performed on a sample of transition economies for the period 1995-2002, confirms that high levels of transition-specific uncertainty had a negative impact on economic growth.

Suggested Citation

  • Andrej Susjan & Tjasa Redek, 2008. "Uncertainty and Growth in Transition Economies," Review of Social Economy, Taylor & Francis Journals, vol. 66(2), pages 209-234.
    • Handle: RePEc:taf:rsocec:v:66:y:2008:i:2:p:209-234
    DOI: 10.1080/00346760701821979
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    References listed on IDEAS

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    1. 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.
    2. Philip Arestis, 1992. "The Post-Keynesian Approach to Economics," Books, Edward Elgar Publishing, number 16, August.
    3. 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.
    4. Paul Davidson, 1991. "Controversies in Post Keynesian Economics," Books, Edward Elgar Publishing, number 121, August.
    5. Sheila C. Dow, 1996. "The Methodology of Macroeconomic Thought," Books, Edward Elgar Publishing, number 933, August.
    6. Peter E. Earl, 1995. "Microeconomics for Business and Marketing," Books, Edward Elgar Publishing, number 159, August.
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    Cited by:

    1. Alessandra Guariglia & John Tsoukalas & Serafeim Tsoukas, 2010. "Investment, irreversibility, and financing constraints in transition economies," Discussion Papers 10/03, University of Nottingham, School of Economics.

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