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Report on adjustment lending II : lessons forEastern Europe

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  • Corbo, Vittorio

Abstract

The Bank introduced adjustment lending in 1979 to help member countries restructure their economies to create conditions conducive to equitable growth while maintaining a sustainable balance of payments. A review of the experience of other nations with adjustment problems may provide useful knowledge for Eastern Europe as the region attempts to make the transition to market economies and to integrate with the world economy. Reforms such as those that Eastern Europe is initiating now have little precedent in recent economic history. Evidence from other countries indicates that output levels are likely to suffer in the early years of massive economic restructuring. Governments must be aware of these adjustment costs, which represent an investment in a better economic system. Recent experience in other countries suggests several constructive steps that Eastern European countries can take to ease their transition to market economies. These include : 1) placing a high priority on dealing with high open or repressed inflation and other manifestations of severe macroeconomic imbalances; 2) removing restrictions on labor mobility and on the exit and entry of firms at the same pace as they liberalize trade; and 3) moving early to create markets for working capital financing - with appropriate mechanisms to assess credit risks - in order to encourage economic restructuring.

Suggested Citation

  • Corbo, Vittorio, 1991. "Report on adjustment lending II : lessons forEastern Europe," Policy Research Working Paper Series 693, The World Bank.
  • Handle: RePEc:wbk:wbrwps:693
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    References listed on IDEAS

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    1. Corbo, Vittorio & Schmidt-Hebbel, Klaus, 1991. "Public policies and saving in developing countries," Journal of Development Economics, Elsevier, vol. 36(1), pages 89-115, July.
    2. Scully, Gerald W, 1988. "The Institutional Framework and Economic Development," Journal of Political Economy, University of Chicago Press, vol. 96(3), pages 652-662, June.
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    4. Fischer, Stanley, 1986. "Issues in Medium-term Macroeconomic Adjustment," World Bank Research Observer, World Bank Group, vol. 1(2), pages 163-182, July.
    5. Solimano, Andres, 1990. "Inflation and the Costs of Stabilization: Historical and Recent Experiences and Policy Lessons," World Bank Research Observer, World Bank Group, vol. 5(2), pages 167-185, July.
    6. Corbo, Vittorio & de Melo, Jaime, 1987. "Lessons from the Southern Cone Policy Reforms," World Bank Research Observer, World Bank Group, vol. 2(2), pages 111-142, July.
    7. Kormendi, Roger C. & Meguire, Philip G., 1985. "Macroeconomic determinants of growth: Cross-country evidence," Journal of Monetary Economics, Elsevier, vol. 16(2), pages 141-163, September.
    8. Jeffrey D. Sachs, 1987. "Trade and Exchange Rate Policies in Growth-Oriented Adjustment Programs," NBER Working Papers 2226, National Bureau of Economic Research, Inc.
    9. Rodrik, Dani, 1990. "How should structural adjustment programs be designed?," World Development, Elsevier, vol. 18(7), pages 933-947, July.
    10. David Lipton & Jeffrey D. Sachs, 1990. "Creating a Market Economy in Eastern Europe: The Case of Poland," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 21(1), pages 75-148.
    11. Giovannini, Alberto, 1985. "Saving and the real interest rate in LDCs," Journal of Development Economics, Elsevier, vol. 18(2-3), pages 197-217, August.
    12. Kiguel, Miguel A & Liviatan, Nissan, 1988. "Inflationary Rigidities and Orthodox Stabilization Policies: Lessons from Latin America," World Bank Economic Review, World Bank Group, vol. 2(3), pages 273-298, September.
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    Cited by:

    1. Erzan, Refik & Holmes, Christopher & Safadi, Raed, 1992. "How changes in the former CMEA area may affect international trade in manufactures," Policy Research Working Paper Series 973, The World Bank.

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