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From Transition to Market: Evidence and Growth Prospects

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... 3 4 Given the progress that CEEC have made towards economic integration into the global economy, and with the EU in particular, Central and Eastern Europe is very a fertile ground for analyzing the impact of openness on growth. 5 Empirical studies of the region have highlighted four groups of factors which were thought to promote recovery and sustained growth: a) the role of macroeconomic variables such as inflation and fiscal balance (Fischer, Sahay and Vegh, 1997), b) structural reforms, in particular liberalisation and privatization ( Havrylyshyn et al., 2000), c) initial conditions such as the degree of macroeconomic and structural distortions at the beginning of transition, or wars and internal conflicts (de , and d) development of institutions as determinants of growth (EBRD, 1997;Brunetti, Kisunko and Weder, 1997;Havrylyshyn and Van Rooden, 2000). Most of these studies estimated growth equations where factors belonging to one or two of the above mentioned groups are considered as relevant explanatory variables. ...
... Import duties were calculated from World Bank (2000) and from national statistics on budget revenues from international trade. 7. See for instance Fischer, Sahay and Vegh (1997), Sachs (1996). 8. Berg et al. (1999) demonstrate that in transition economies the hypothesis of a unit root in the GDP level may be ruled out. ...
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To various degrees, Central and Eastern European countries increased their participation to the world economy over the last ten years. In particular, they accepted the challenge of trade openness and attracted significant foreign direct investment. This paper assesses the impact of these major changes on output growth in this region. Results of a panel data analysis suggest that increased EU integration and openness as well as reduced import duties were favourable to development. There is also evidence that increased FDI inflows may be associated with better output performances. Comparative Economic Studies (2002) 44, 119–136; doi:10.1057/ces.2002.22
... where Y is p.c. GDP in 1960 divided by 1000 (at PPP); POP is the growth rate of population; and INV is the share of gross fixed investment in GDP. Both growth equations were re-specified with the data for the European transition economies for the year 1995 and then used for calculating the longer-run growth rates (see Fischer et al., 1998). Table 1 reports the outcomes of these calculations, as well as of some hypothetical alternative scenarios. ...
... Table 1 reports the outcomes of these calculations, as well as of some hypothetical alternative scenarios. Source: Fischer et al. (1998). ...
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For about a decade, GDP growth in Central European countries has been consistently faster than in the 'old' EU-15. As a first approximation, one can expect a growth differential of about 2 percentage points to prevail also in the future. This practical rule-of-thumb is broadly consistent with the outcomes of some early attempts at a formal estimation of the longer-term growth rates for the countries considered. The early models underlying those attempts were inspired by the 'New Growth Theory' (NGT) approach (exemplified by Barro and Sala-i-Martin, 1995). This study reviews the available estimates derived from the NGT models and proposes new ones, taking into account the most recent data available. The base-line scenario suggests that over the period 2005-15, per capita GDP will grow on average by 3.6% per year in the Czech Republic, 4.1% in Hungary and 4.6% in Slovakia (with the EU-15 growing by 2.4%). At constant (1999) PPPs, the Czech per capita GDP will attain 71% of the EU-15 level, Hungary’s 63% and that of Slovakia 59%. Apart from estimates for the aggregate GDP levels/growth rates, the study also assesses the likely levels of the future (2015) trade balances, gross capital formation, FDI inflows and stocks. The second part of the study is concerned with the estimation of changes in the structure of value added and employment, consistent with the 'macro' estimates for the period 2005 15. Although one may expect convergence, in terms of productivity and sectoral composition, to the EU-15 levels, sizeable deviations will remain. Aggregate employment forecasts for 2015 appear to be quite sensitive to the GDP growth rate.
... Then in a second stage, to use derived estimates from that model to generate out-of-sample predictions for the transition economies. This approach has for instance been used in Fischer et al. (1998b) and EBRD (1997) for the early years of the transition process. The outcome of that forecast can then be regarded, we argue, as a benchmark for what growth rates we should expect in the transition region if the region behaved as other regions and countries, as a normal region that is. ...
... Since the number of specifications of growth models is almost as big as the number of macroeconomists, the challenge is to define the specification of such a model. Based on the discussion in for instance Fischer et al. (1998b) and EBRD (1997), a preferred approach is to select a parsimonious model that have been shown to be robust to different permutations of the exact specification. Furthermore, to derive estimates of what would be a normal growth rate in each respective country in the region given the growth determinants, we need estimates of model coefficients derived from regressions on a different set of countries, a group of 'normal' countries. ...
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We look at the growth experience of 25 transition countries over the 25 years since the dissolution of the USSR. The initial collapse in income was much more severe in 12 former Soviet Union countries (FSU12) than in the 10 transition countries that joined the EU in 2004 and 2007 (EU10). In 2015, FSU12 income levels were further behind EU10 than they were at the start of transition, despite more rapid growth in the last 15 years. Compared to predictions from a parsimonious growth model, the region as a whole is ‘normal’ in terms of growth performance since the 2000s. However, the FSU12 over‐perform and the EU10 under‐perform relative to model predictions for the last 15 years.
... Empirical growth analysis was pioneered by Barro (1991) and Mankiw et al (1992). A large empirical literature on the determinants of economic growth in transition economies appeared in the 1990s and 2000s, including Fischer, Sahay and Vegh (1998), Havrylyshyn, Izvorski and van Rooden (1998), Berg et al. (1999), and Havrylyshyn and van Rooden (2000). The studies have identified a variety of microeconomic, structural, and institutional factors of economic growth in transition economies in general. ...
... The last variable included in our specification is natural logarithm of FDI per capita in million dollars in year-2000 prices. Most theoretical and empirical findings imply that FDI has a strong positive growth impact on the recipient economy (see, e.g., theoretical studies of Dunning and Narula 1996, Borenstein, Gregorio and Lee 1998, Markusen and Venables 1999 The source of all data used is Russia's regions yearbooks published yearly by Goskomstat (Russian State Statistical Agency). We are aware that Russian statistics suffer from a bad data problem. ...
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A modification of Barro and Sala-i-Martin empirical framework of growth model is specified to examine determinants of per capita growth in 74 Russian regions during period of 1996-2005. We utilize both panel and cross-sectional data. Results imply that in general regional growth in 1996-2005 is explained by the initial level of region's economic development, the 1998 financial crisis, domestic investments, and exports. Growth convergence between poor and rich regions in Russia was not found for the period studied.
... In 2002, only Cyprus and Slovenia reached a degree of prosperity matching or slightly exceeding that of the economically weaker EU member countries. 4 As Fischer et al. (1998aFischer et al. ( , 1998b argued, it may take at least two decades before CEE countries can catch up with the EU member countries at the lower end of the current GDP scale, although becoming an EU member might help transition economies to speed up growth because of more intensive trade relations, technology transfers, and lower interest rates. ...
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This paper focuses on the economic and institutional process that should lead ten EU acceding countries to integrate the EU economy in 2004 and to adopt the euro a few years thereafter. In fact, the present macroeconomic divergence between the EU and candidate countries raises serious doubts about the feasibility of an enlargement of the EMU area by the end of this decade. Prospective EU member countries need to make huge efforts in order to fulfil the EMU criteria consistently over the next few years. This may lead to employment and growth losses in acceding countries, which would run counter their catching-up process with respect to the EU. It also cannot be ruled out that present EU countries would have to bear part of the enlargement costs, e.g. in the form of increasing transfers to and diminishing subsidies from the EU budget. This may provoke tensions within the EU and in particular as regards the `one-size-fits-all' monetary policy decisions of the ECB. In this paper it is argued that monetary integration of EU candidate countries calls for a certain degree of flexibility in the conduct of their economic policy that the respect of the convergence criteria actually prevents. Each candidate country should be able to implement -- at a pace appropriate to its domestic economy -- the best-suited fiscal, monetary, and exchange rate policies in an attempt to reduce catching-up costs in the form of employment and growth losses, which the straitjacket of the EMU convergence process as well as the Stability and Growth Pact are bound to entail for monetary union. JEL Classification Codes: D72, E12, E52 Keywords: candidate countries, euro area, EU enlargement, monetary policy, settlement systems 1.
... Greece, for example, has barely converged on average EU living standards over the last thirty years, while Ireland experienced little convergence over the 1960s, 70s and 80s (Barry, 2002). The importance of the general policy environment to convergence is explicitly recognized by Fischer et al. (1998) who, in forecasting the growth prospects of CEE economies, supplement the standard growth-regression variables with measures of the degree of liberalization prevailing across a range of markets. Our own methodology in assessing convergence prospects can be seen as a response to an earlier challenge posed by Fischer (1991), who wrote that: ...
Article
The processes that will drive the next stage of the Czech transition are likely to be similar to those promoting real convergence in the countries of the EU periphery. We draw on previous modeling research on these latter economies to construct and calibrate a small macrosectoral model of the Czech Republic. Model simulations explore some key policy issues facing CEE-country decision-makers: labour market reforms, disinflation and industrial development. Our analysis suggests that much can be learned from the experience of countries like Ireland and Portugal which have converged substantially towards EU average living standards.
... 74 We notice however, that the UK lately reveals rather high rates of inflation, not in coherence with the US pattern. 75 In order to account for the differing chronological points in time when IT was introduced, we follow Fischer et al. (1998) and compute the data relative to the year of its introduction, referring to "IT time" as opposed to "calendar time". The inflation rate for IT countries is a non-weighted average. ...
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This paper deals with a 'new' type of monetary policy making: Inflation Targeting (IT). It attempts to identify reasons for which countries might be inclined to adopt this framework for monetary policy. By reviewing recent experience of inflation targeting countries, the paper outlines the major operational arguments regarding the implementation of IT. Another important issue is the applicability of IT in transition countries: in the light of EU (and, in the longer run, EMU) accession, Inflation Targeting might be an interesting policy framework to at least some countries in Central and Eastern Europe. --
... During the 1990s growth in the CEECs was mainly based on removing distortions and introducing macro-and micro-organisational innovations (Berg et al., 1999;Fischer et al., 1998;Havrylyshyn, 2001). Extensive econometric work undertaken by the World Bank and IMF staff shows that the major factors explaining recovery and growth in CEECs are initial conditions, macroeconomic policies, and structural reforms (ibid). ...
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Book description: After the post-socialist transformation, the issues of growth, development and knowledge based economy are back on the research and policy agenda for Central and Eastern Europe (CEE). This volume is the first comprehensive analysis of growth and restructuring in CEE from the perspective of knowledge based economy. Discussing issues such as: Will CEE become a liability or an asset to the EU in becoming a knowledge based economy? How has the tranformation of CEECs during the 1990s affected the knowledge based economies in these countries? What are the advantages and disadvantages of the CEECs growing in knowledge intensive sectors? What have CEECs done to increase knowledge intensity of their economies and what could they do to further upgrade, especially within the enlarged EU?
... Estos trabajos han puesto de manifiesto que el entorno macroeconómico general y los procesos de cambios estructurales e institucionales han incidido, especialmente en el período inicial de transición, e inciden sobre los anteriores factores tradicionales del crecimiento económico. Así, en primer lugar, se ha enfatizado el papel de la estabilidad macroeconómica como una condición necesaria para el crecimiento[Fischer et al. (1998)]. De hecho, estos trabajos atribuyen el colapso de la producción de los primeros años de la transición a los efectos desestabilizadores de unas políticas fiscales demasiado laxas, la monetización de los déficit públicos y las crisis cambiarias, elementos que, en conjunto, provocaron altas tasas de inflación, e incluso hiperinflaciones, en algunos de esos países. ...
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La ampliación hacia el este de la Unión Europea (UE) contempla actualmente la incorporación a medio plazo de hasta trece países. Por un lado, los diez países de Europa central y oriental, con economías inmersas en un proceso de transición desde sistemas comunistas de planificación centralizada a economías de mercado (Bulgaria, Eslovaquia, Eslovenia, Estonia, Hungría, Letonia, Lituania, Polonia, la República Checa y Rumania). Por otro, tres países mediterráneos (Chipre, Malta y Turquía). El pasado 12 de diciembre, en la Cumbre de Copenhague, se acordó la entrada en la UE de un primer grupo amplio de países, todos menos Bulgaria, Rumania y Turquía, de manera que estos 10 países y los actuales miembros puedan ratificar los tratados de adhesión durante 2003 y que todos ellos participen en las elecciones al Parlamento Europeo en 2004 como miembros de la UE. Para Bulgaria y Rumania, la fecha de adhesión que actualmente se baraja como más probable es 2007, mientras que para Turquía se ha fijado la fecha de diciembre de 2004 para evaluar si cumple con todos los criterios políticos y democráticos que requiere la UE para poder empezar a negociar a partir de ese momento. URL: https://www.bde.es/f/webbde/SES/Secciones/Publicaciones/InformesBoletinesRevistas/BoletinEconomico/02/Fich/be0212-art6.pdf
... In the scientific literature in this field, especially in early published papers, it was indicated that the progress in transition basically depends on: start-up position of a country, macroeconomic stability and the level of structural reforms (e.g. De Melo, Denizer, Gelb, & Tenev, 1997;Fischer, Sahay & Vegh, 1998;Campos & Coricelli, 2002). Most papers, e.g. ...
Article
The aim of this paper is to analyse the relative positions of Western Balkan countries and to determine the differences or similarities in the results based on survey data (of international institutions: EBRD, World Bank, World Economic Forum, Heritage Foundation), and on based on selected key statistical indicators. Using the sample of countries in same region and by applying the method of “multi-country” statistical analysis, it was attempted to establish relation between results obtained in studies of international institutions, and some actual achieved key economic performances by the first measure of correlation (so-called Spearman's coefficient of correlation). The obtained results differ to a smaller or greater extent according to the experiential test we used in the case of this region. Therefore, our findings reveal that overall economic position of selected country cannot be perceived only by relying on one methodology or type of data. Consequently, we point out that multi-criteria are a must and each methodology can be useful, because it emphasizes different aspects of the economic performances and country position.
... A rendszerváltó országokat vizsgáló, az 1990-es években készített tanulmányok szinte kizárólag a neoklasszikus közgazdaságtan alapvetéseire építenek, annak mennyiségi szemléletét alkalmazzák. Ezek közül említést érdemel de Melo et al. (1996) "From Plan to Market" című nagyívű munkája, amely a növekedés, az infláció és a liberalizáció összefüggéseit elemezi, továbbá Fischer et al. (1998), tanulmánya, amely a makrogazdasági teljesítmények vizsgálata során a szigorú fiskális politika, a rögzített árfolyamrendszer és főként a strukturális reformok együttesének növekedésben betöltött szerepét azonosítja. Fischer -Sahay (2000) (2004), Barro (1996), Clague (1997), Mauro (1995), Lane -Tornell (1999) munkái emelkednek ki, az informális intézményeket többek között Boettke (2008), Knack -Keefer (1997), Pejovich (2003), Tabellini (2005), és Williamson (2009) vizsgálja. ...
... Otros estudios han puesto de manifiesto que el entorno macroeconómico general y los procesos de cambios estructurales e institucionales han incidido, especialmente en el período inicial de transición, e inciden sobre los anteriores factores tradicionales del crecimiento económico. Así, en primer lugar, se ha enfatizado el papel de la estabilidad macroeconómica como una condición necesaria para el crecimiento [Fischer et al. (1998) o Christoffersen y Doyle (2000)]. De hecho, estos trabajos atribuyen el colapso de la producción de los primeros años de la transición a los efectos desestabilizadores de unas políticas fiscales demasiado laxas, la monetización de los déficit públicos y las crisis cambiarias, elementos que, en conjunto, provocaron altas tasas de inflación, e incluso hiperinflaciones, en algunos de esos países. ...
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El actual proceso de adhesión a la UE es el de mayor dimensión en términos de número de países y de población, pero también el que conlleva mayores diferencias en renta per cápita entre los miembros actuales y los países candidatos. El principal reto para los últimos es avanzar conjuntamente en los procesos de convergencias nominal y real con los países de la UE, pues ambos se refuerzan mutuamente. Los avances en convergencia nominal hasta ahora han sido sustanciales en cuanto al control de la inflación, pero mucho más desiguales en la consolidación fiscal. Por otro lado, el proceso de convergencia real ha sido modesto, por lo que se extenderá mucho más allá de la fecha de adopción del euro. URL: http://www.minetad.gob.es/Publicaciones/Publicacionesperiodicas/EconomiaIndustrial/RevistaEconomiaIndustrial/345/013-GARCIA.pdf
... Therefore, mainstream neoliberal commentators typically focus on the successes of transition towards an LME in (some) post-communist countries, whereas any negative developments in the region are interpreted as the result of incomplete or failed neoliberalization (e.g. Balcerowicz 1995;World Bank 1996;Hernandez-Cata 1997;Klaus 1997;Fischer, Sahay, and Végh 1998;Dąbrowski and Gortat 2002;World Bank 2002). Throughout most of the 1990s, it was Poland-the first Eastern European battleground of liberalization, marketization, and privatization-which was praised for becoming a 'European tiger' , a neoliberal role model for the entire continent. ...
Chapter
Regulatory institutions offer a powerful means to coordinate firms with other actors, notably state actors, and hence create institutional advantages. Until the mid-1980s, changes in institutions for the regulation of network industries such as telecommunications, energy and transport followed the predictions of the Varieties of capitalism model. Thus, Britain privatised and liberalised, France followed a grands projets strategy, and Germany one of close links between public suppliers and private equipment manufacturers and consensus among social partners. However, from the mid-1980s onwards, the EU has developed an increasingly detailed regulatory framework that is based on a 'liberal market economy' model of regulatory institutions and runs counter to other coordinated or state-led models. It has played an important part in reforms in France and Germany that reshaped formal regulatory institutions in ways similar to those in Britain, notably liberalisation, privatization, and the creation of independent regulatory agencies. Thus, some regulatory institutions have seen considerable change and convergence across countries that represent different varieties of capitalism. At the same time, informal regulatory institutions continued to differ greatly across the three nations - both informal norms and linkages between governments and suppliers. Moreover, strategies for 'national champion' firms and uses of European integration in pushing regulatory reform remained distinct. Thus, overall the chapter argues that in the face of European integration, analysis of varieties of capitalism needs to differentiate between formal and informal institutions, and that convergence in the former is compatible with continuing contrasts in national strategies and the process of reform.
... The reasons, which were analysed in detail in the literature (see e. g. Williamson 1993; Fischer et al. 1997), are not important from our point of view. The gravity of the recession is unquestionable, but the question arises whether the Belarusian recession can be regarded as outstanding in the region. ...
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This paper focuses on Belarus in order to find explanation as to why Alexander Lukashenko was able remain the authoritarian leader of Belarus, while in Ukraine the position of the political elite had proved less stable and collapsed in 2004. We seek to determine whether the internal factors (macroeconomic conditions, standard of living, the oppressive nature of the political system) play a significant role in the operation of the domino effect. This article emphasises the determining role of immanent internal factors, thus the political stability in Belarus can be explained by the role of the suppressing political regime, the hindrance of democratic rights and the relatively good living conditions that followed the transformational recession. Whilst in Ukraine, the markedly different circumstances brought forth the success of the Orange Revolution.
... This currently stands at around one-third of the average EU level. 17 Data on how the transition economies fare in terms of these indicators is given inFischer, Sahay and Végh (1998). 15 industry must ultimately compete for scarce resources, explore some characteristics of the strategies as alternative paths to development. ...
Article
Since unification, the debate about Germany's poor economic performance has focused on supply-side weaknesses, and the associated reform agenda sought to make low-skill labour markets more flexible. We question this diagnosis using three lines of argument. First, effective restructuring of the supply side in the core advanced industries was carried out by the private sector using institutions of the coordinated economy, including unions, works councils and blockholder owners. Second, the implementation of orthodox labour market and welfare state reforms created a flexible labour market at the lower end. Third, low growth and high unemployment are largely accounted for by the persistent weakness of domestic aggregate demand, rather than by the failure to reform the supply side. Strong growth in recent years reflects the successful restructuring of the core economy. To explain these developments, we identify the external pressures on companies in the context of increased global competition, the continuing value of the institutions of the coordinated market economy to the private sector and the constraints imposed on the use of stabilizing macroeconomic policy by these institutions. We also suggest how changes in political coalitions allowed orthodox labour market reforms to be implemented in a consensus political system.
... Inertia and downward price rigidity are argued to be important in explaining inflation when it is at moderate levels. Fischer et al. (1998) use exchange rate regime, fiscal balance and structural reforms as explanatory variables to understand inflation dynamics in 25 transition countries with the sample period of 1992-1996. They find that lower fiscal deficit, fixed exchange rate regime and structural reforms help stabilizing high inflation in these countries. ...
Article
The five former Soviet republics have become separate states, developing at different rates and in different directions, and with different political and economic regimes. As a result, the cohesion of the region has broken down and economic development is hampered by internal and regional political troubles. Poverty has risen dramatically and bad governance is inhibiting efficient exploitation of natural resources in some countries. The transition to market economies, however, has been largely completed, even if the markets themselves are imperfect. This raises hopes for the longterm future of the region ... Les cinq ex-Républiques soviétiques sont devenues des États distincts, dotés de régimes politiques et économiques différents, et dont la croissance s’effectue dans des directions et à des rythmes également différents. En conséquence, la région a perdu en cohérence et le développement économique est freiné par des troubles politiques internes et régionaux. La pauvreté s’est accrue dans des proportions considérables et les problèmes de gouvernance empêchent l’exploitation efficace des ressources naturelles dans certains pays. La transition vers l’économie de marché a toutefois bien avancé, même si les marchés eux-mêmes sont imparfaits. L’avenir à long terme de la région peut donc être envisagé avec une certaine confiance ...
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Głównym celem monografii jest prezentacja wyników badań przeprowadzonych przez autora. Problemem podjętym w pracy jest pytanie o mechanizm oddziaływania instytucji na gospodarkę. Celem pracy jest charakterystyka i analiza wpływu instytucji formalnych tworzonych przez państwo na wzrost gospodarczy na przykładzie doświadczeń krajów postsocjalistycznych. W książce przyjęto następującą tezę: postsocjalistyczna transformacja ustrojowa była zmianą instytucjonalną, która była realizowana przez państwo. Państwo w warunkach powstałej po upadku gospodarki centralnie zarządzanej próżni systemowej nie tylko musiało się samo zmienić, ale również musiało wprowadzić instytucje państwa niezbędne do właściwego funkcjonowania demokratycznej gospodarki rynkowej. https://www.ceeol.com/search/book-detail?id=758185
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This book is about the first twenty years of post-communist transformation in the Donbas (Ukraine) and Upper Silesia (Poland), the two largest industrial regions of Eastern Europe. It exposes a dramatic increase in inequality and poverty, persistently high levels of unemployment and of criminal and self-destructive behaviour, which have all characterised Upper Silesia’s transition to capitalism. This study also shows how the Donbas population has suffered from a steep decline in living conditions and a sharp deterioration of healthcare and human development standards. Based on original primary data, this book stresses the detrimental impact on regional restructuring of the inherited structural liabilities and exogenous shocks emanating from the collapse of state socialism. The study’s main argument, however, is that what determines the eventual outcome of transformation is not so much the legacy of the communist (or even pre-communist) past or the extent of neoliberalisation, but the success which a society has in moulding its major institutions – both inherited from state socialism and those copied from modern capitalism – in a complementary, reciprocally sustaining manner.
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Russia has failed to adopt a transition strategy for nearly a decade, which may lead to high economic growth and a long-term catching-up process in relation to the average per capita-income of the OECD countries. The transformation from plan to market, which began in 1992 under the assumption that these reform efforts would turn around the country’s economic decline, proved to be rather costly from the beginning. Only since 1999 is there some economic recovery, partly due to the large depreciation of the Ruble after the financial crisis in 1998, and partly to the rise of the price for crude oil on the world market.
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In the early 1990s the countries of Central and Eastern European (CEE), the Baltic States and the other countries of the former Soviet Union (OFSU) abandoned the communist rule and began the transition to a market economy. Several studies empirically analyse the common large output decline at the start of transition, followed by different recovery patterns across countries (see Figure 1). Fisher et al. (1996) fined macroeconomic stabilisation as an important condition for growth to resume. Stabilisation can be thought of as policies aimed at inflation (and fiscal balance) adjustment. De Melo et al. (1997) identifies initial conditions and finds them to be a significant determinant of output performance in the first years of transition. Initial conditions are differences in macroeconomic, institutional and natural resource conditions prevailing at the start of transition. Berg et al. (1999) allows for time-varying effects of these initial conditions. De Melo et al. (1996) constructs a reform indicator (RI) that covers different areas of structural reform. Reform is ‘the process of installing a market economy’ (e.g. price liberalisation, privatisation). They find a significant negative impact of the current level of the reform indicator and a significant positive impact of the lagged level on real output growth.
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This paper examines driving forces of economic growth in the second transition decade, by testing which determinants from the first decade remain dominant, and which new factors appear in explaining growth. To this end a panel simultaneous equation model is estimated based on a sample of 27 transition countries in the period 1999- 2009. According to the main findings of the paper initial conditions do not play a role in determining economic growth in the second decade, but macroeconomic stabilization and structural reforms still matter. However, in contrast to the first decade, the overall impact of structural reforms is not positive, indicating that difficult progress with reforms in the second decade could slow down economic growth. Moreover, EU membership seems to have the additional effect of slowing down the growth of the accessing countries, meaning that once a transition country becomes an EU member it has a similar growth path to other EU countries in terms of lower growth rates. All this indicates that only countries that undertook fast reforms in the early phase of transition experienced significant benefits from reforms, achieving higher levels of economic development and becoming closer to developed EU countries. Finally, investments and openness of the economy appear as new important determinants of growth.
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The present fiscal difficulties of many countries amplify the call for structural reforms. To provide stylized facts on how reforms worked in the past, we quantitatively review 60 studies estimating the relationship between reforms and growth. These studies examine structural reforms carried out in 26 transition countries around the world. Our results show that an average reform caused substantial costs in the short run, but had strong positive effects on long-run growth. Reforms focused on external liberalization proved to be more beneficial than others in both the short and long run. The findings hold even after correction for publication bias and misspecifications present in some primary studies.
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This paper explores the determinants of productivity in the countries of Eastern Europe (EE) through the perspective of ‘narrow’ and ‘broad’ national systems of innovation (NSI). Based on panel econometrics, it examines the extent to which systems in EE could be considered ‘(in)efficient.’ Our results suggest that the EE countries have lower levels of productivity than might be expected given their research and development (R&D), innovation and production capabilities. The inefficiencies of ‘broad’ NSI are compounded by the inefficiencies of ‘narrow’ NSI in terms of generating numbers of science and technology publications and resident patents relative to R&D employment compared to the rest of the world. Our results point to an important distinction between technology and production capability as the drivers of productivity improvements and provide some policy implications.
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Bu çalışmada, 1995-2009 dönemine ait veri ve panel veri yöntemleri kullanılarak 10 eski Sovyet ler Birliği üyesi ülkede Wagner yasasının geçerli liği incelenmiştir. Wagner yasası ekonomik gelişme sonucu kamu faaliyetinde artış olmasını ifade etmektedir. Bu çalışmada uygulanan panel eşbütünleşme analizi kamu harcamaları ve gelir düzeyi değişkenlerinin koentegre olduklarını göstermektedir. İki aşamalı En Küçük Kareler yöntemine dayanan panel nedensellik ve hata düzeltme modeline dayanan geleneksel Granger nedensellik sınamaları nedensellik ilişkisinin ekonomik büyümeden kamu harcamalarına doğru tek yönlü olduğunu göstermektedir. Wagner yasasının matematiksel ifadesi olan regresyonların sabit etkiler ve rassal etkiler yöntemlerine göre tahmin sonuçları da gelir düzeyi arttıkça kamu sektörünün büyüdüğü fikrini kısmi olarak desteklemektedir. Bulgular dan hareketle, eski Sovyetler Birliği ülkeleri için Wagner yasasının geçerli olduğu sonucuna varılmıştır. This study tests Wagner’s law for a panel of 10 former Soviet Union member countries over the period of 1995-2009. Wagner’s law indicates that government activities expand together with economic development. Empirical results from panel co-integration test suggest that there is long-run equilibrium relationship between go vernment expenditure and income level. Results of panel causality test that based on two stages lest square model and traditional Granger causa lity test that based on error correction model show that there is unidirectional causality run ning from economic growth to government expenditure expansion. Finally, fixed and random effect estimations of five Wagner’s law regressi ons give some evidences that increase in income level expands government activities. These results suggest that Wagner’s law holds in former Soviet Union countries.
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A simple model is developed to understand inflationary pressures and stabilization in non-market economies. It is shown that in the typical planned economy, the endogeneity of the money supply and the over-determination of the system (given that both prices and wages are set by the planners) imply that a permanent increase in wages leads to an ever-increasing monetary overhang. The model also suggests that price liberalization should lead to a price level overshooting provided that wages remain a nominal anchor. In light of the model, the paper reviews the inflation and stabilization experiences of several transition economies in Eastern Europe and the former Soviet Union. The paper concludes that (i) transition economies have suffered from essentially the same inflationary pressures as did planned economies, and (ii) the exchange rate has been more effective than money as a nominal anchor in reducing inflation
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A vast literature uses cross-country regressions to search for empirical linkages between long-run growth rates and a variety of economic policy, political, and institutional indicators. This paper examines whether the conclusions from existing studies are robust or fragile to small changes in the conditioning information set. The authors find that almost all results are fragile. They do, however, identify a positive, robust correlation between growth and the share of investment in GDP and between the investment share and the ratio of international trade to GDP. The authors clarify the conditions under which there is evidence of per capita output convergence. Copyright 1992 by American Economic Association.
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Internationally comparable data on income and government expenditure for 115 countries, covering the period 1950-80, are used to assess the validity of Wagner's hypothesis. Individual-country time-series data and several intercountry cross-sections are studied. Besides a tremendous diversity in the position for various countries, the results indicate that while there is support for the hypothesis in some time-series data sets, such support is lacking in most cross-section estimates. Much of the support for the hypothesis reported in many earlier studies, therefore, was probably due to either use of limited samples or inadequate data comparability across the observations studied.
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Using a regression analog of growth accounting, I present cross-sectional and panel regressions showing that growth is negatively associated with inflation, large budget deficits and distorted foreign exchange markets. Supplementary evidence suggests that the causation runs from macroeconomic policy to growth. The framework makes it possible to identify the channels of these effects: inflation reduces growth by reducing investment and productivity growth; budget deficits also reduce both capital accumulation and productivity growth. Examination of exceptional cases shows that while low inflation and small deficits are not necessary for high growth even over long periods, high inflation is not consistent with sustained growth.
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Growth in this model is driven by technological change that arises from intentional investment decisions made by profit-maximizing agents. The distinguishing feature of the technology as an input is that it is not a conventional good or a public good; it is a nonrival, partially excludable good. Because of the noconvexity introduced by a nonrival good, price-taking competition cannot be supported. Instead, the equilibrium is one with monopolistic competition. The main conclusions are that the stock of human capital determines the rate of growth, that too little human capital is devoted to research in equilibrium, that integration into world markets will increase growth rates, and that a large population is not sufficient to generate growth. Copyright 1990 by University of Chicago Press.
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For 98 countries in the period 1960–1985, the growth rate of real per capita GDP is positively related to initial human capital (proxied by 1960 school-enrollment rates) and negatively related to the initial (1960) level of real per capita GDP. Countries with higher human capital also have lower fertility rates and higher ratios of physical investment to GDP. Growth is inversely related to the share of government consumption in GDP, but insignificantly related to the share of public investment. Growth rates are positively related to measures of political stability and inversely related to a proxy for market distortions.
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Soviet growth for 1960-89 was the worst in the world, after controlling for investment and human capital. And relative performance worsens over time. The authors explain the declining Soviet growth rate from 1950 to 1987 by the declining marginal product of capital. The rate of total factor productivity growth is roughly constant over that period. Although the Soviet slowdown has conventionally been attributed to extensive growth (rising capital-to-output ratios), extensive growth is also a feature of market-oriented economies like Japan and Korea. One message from the authors'results could be that Soviet-style stagnation awaits other countries that have relied on extensive growth. The Soviet experience can be read as a particularly extreme dramatization of the long-run consequences of extensive growth. What led to the relative Soviet decline was a low elasticity of substitution between capital and labor, which caused diminishing returns to capital to be especially acute. (The natural question to ask is why Soviet capital-labor substitution was more difficult than in Western market economies, and whether this difficulty was related to the Soviets'planned economic systems.) Tentative evidence indicates that the burden of defense spending also contributed to the Soviet debacle. Differences in growth performance between the Soviet republics are explained by the same factors that figure in the empirical cross-section growth literature: initial income, human capital population growth, and the degree of sectoral distortions. The results the authors got with the Soviet Union in the international cross-section itself was disastrous for long-run economic growth in the Soviet Union. This point may now seem obvious but was not so apparent in the halcyon days of the 1950s, when the Soviet case was often cited as support for the neoclassical model's prediction that distortions do not have steady state growth effects. Since a heavy degree of planning and government intervention exists in many countries, especially developing countries, the ill-fated Soviet experience continues to be of interest.
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A central question for empirical economics, particularly economic growth, is which explanatory variables to include and exclude in the regressions. This paper aims to identify variables strongly correlated with provincial income growth in the Philippines by applying robustness procedures in determining which variables are strongly correlated with income growth. The extreme bound analysis (EBA) and Bayesian Averaging of Classical Estimates (BACE) were applied to fifteen determinants of income growth from a data set consisting of 74 Philippine provinces for the period 1985 to 2003 to test which among the explanatory variables are strongly correlated to growth. The tests show that among the fifteen variables, five variables stand out as being robust. The log of initial income, the ARMM indicator, the expenditure GINI and its square and the proportion of young dependents are all considered as strongly correlated to growth.
When is Stabilization Expansionary ? unpublished forthcoming inEconomic Policy The
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European Bank for Reconstruction and Development Transition Report EBRD
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Martha andAlanGelb From Plan to Market : Patterns of Transition unpublished The
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andCarlos b Economies in Transition : The Beginnings of Growth Papers and Proceedings
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