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Mind the Break! Accounting for Changing Patterns of Growth during Transition

  • Jan Fidrmuc


  • Ariane Tichit


We argue that econometric analyses based on transition countries’ data can be vulnerable to structural breaks across time and/or countries. We demonstrate this argument by identifying structural breaks in growth regressions estimated with data for 25 countries and 12 years. Our method allows identification of structural breaks at a-priori unknown points in space or time. The only prior assumption is that breaks occur in relation to progress in implementing market-oriented reforms. We find robust evidence that the pattern of growth in transition has changed at least two times, yielding thus three different models of growth associated with different stages of reform. The speed with which individual countries progress through these stages differs dramatically, however.

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Paper provided by William Davidson Institute at the University of Michigan in its series William Davidson Institute Working Papers Series with number 2004-643.

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Length: 30 pages
Date of creation: 01 Jan 2004
Date of revision:
Handle: RePEc:wdi:papers:2004-643
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  23. Wolf, H.C., 1999. "Transition Strategies: Choices and Outcomes," Princeton Studies in International Economics 85, International Economics Section, Departement of Economics Princeton University,.
  24. Falcetti, Elisabetta & Lysenko, Tatiana & Sanfey, Peter, 2006. "Reforms and growth in transition: Re-examining the evidence," Journal of Comparative Economics, Elsevier, vol. 34(3), pages 421-445, September.
  25. Vladimir Popov, 2000. "Shock Therapy Versus Gradualism: The End Of The Debate (Explaining The Magnitude Of Transformational Recession)," Comparative Economic Studies, Palgrave Macmillan, vol. 42(1), pages 1-57, April.
  26. de Melo, Martha & Denizer, Cevdet & Gelb, Alan & Tenev, Stoyan, 1997. "Circumstance and choice : the role of initial conditions and policies in transition economies," Policy Research Working Paper Series 1866, The World Bank.
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