From plan to market : patterns of transition
In analyzing the transitional experience of countries in Central and Eastern Europe (CEE) and the former Soviet Union (FSU), the authors find strong common patterns for countries at similar stages of reform despite differences in initial conditions. To establish rankings, the authors create a reform index combining the intensity and duration of economic liberalization. Freeing domestic prices is one element of reform captured by the index; it was needed to enable governments to cut subsidies and restore macroeconomic balance. Other dimensions of reform captured by the index are liberalization of external trade, including foreign currency convertibility, and facilitation of private sector entry through privatization of state enterprises and improvements in the environment for private sector development. Some countries moved faster on reform than others, and one major reason appeared to have been the pace of political liberalization. Liberalization has, indeed, encouraged capital and labor to reallocate from industry toward services, many of which were previously repressed; and the repressed sectors fueled the return to positive growth in fast reformers. For slow reformers, the main problem in achieving stabilization has been the continued monetization of fiscal and quasi-fiscal deficits, associated with attempts to maintain employment in the old system. Among the policy implications are: 1) stabilization is a priority for the resumption of growth, and this requires extensive liberalization; 2) stabilization is made difficult by output contractions in the early stages of liberalization, by limited external financing, and by very large depreciations of the real exchange rate; and 3) there is no evidence that a slower pace of reform strengthens the fiscal position of slow reformers; their consolidated fiscal and quasi-fiscal deficits are quite high.
|Date of creation:||31 Jan 1996|
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- Milanovic, Branko, 1995. "Poverty, inequality, and social policy in transition economies," Policy Research Working Paper Series 1530, The World Bank.
- Aslund Anders, 1994. "Lessons of the First Four Years of Systemic Change in Eastern Europe," Journal of Comparative Economics, Elsevier, vol. 19(1), pages 22-38, August.
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"Empirical Linkages Between Democracy and Economic Growth,"
British Journal of Political Science,
Cambridge University Press, vol. 24(02), pages 225-248, April.
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- Kornai, J., 1993. "Transformational Recession; A General Phenomenon Examined Through the Example of Hangary's Development," Harvard Institute of Economic Research Working Papers 1648, Harvard - Institute of Economic Research.
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