The Evolution of Output in Transition Economies: Explaining the Differences

Abstract

What are the relative roles of macroeconomic variables, structural policies, and initial conditions in explaining the time path of output in transition and the large observed differences in output performance across transition economies? Using a sample of 26 countries, this paper follows a general-to-specific modeling approach that allows for differential effects of policies and initial conditions on the private and state sectors and for time-dependent effects of initial conditions. While showing some fragility to model specification, the results point to the preeminence of structural reforms over both initial conditions and macroeconomic variables in explaining cross-country differences in performance and the timing of the recovery.

Igniting growth surges: Lessons from the past

“…Berg et al (2012) pointed out the critical role of macroeconomic stability and trade diversification to ignite and sustain growth. Borensztein et al (1999); Falcetti et al (2006) and Iradian (2007) show that market-oriented reforms and macroeconomic stabilization policies have been positively associated with growth in transition economies; however, some less-reforms minded countries have also grown strongly recently (see also, Becker & Olofsgård, 2018). In addition, other factors, including fiscal surpluses, output recovery and favourable external environment (e.g., higher oil prices, higher external growth and positive terms of trade shock) also contribute to accelerated growth in transition economies.…”

“…Borensztein et al. (1999); Falcetti et al. (2006) and Iradian (2007) show that market‐oriented reforms and macroeconomic stabilization policies have been positively associated with growth in transition economies; however, some less‐reforms minded countries have also grown strongly recently (see also, Becker & Olofsgård, 2018).…”

International Financial Institutions Ask to Contribute to Climate Protection

“…stages of economic (and thus financial) transition [21][22][23][24][25][26][27][28][29][30] in countries that decades ago still were part of a much more secluded economic sphere [31][32][33][34][35][36][37][38][39][40], and thus had thrived less, economically and financially, despite their mostly healthy base of human capital. One of the most recent and most comprehensive reports is by UNECE [41]; thus, providing a cutting-edge and neutral set of assessments and recommendations for countries with a similar structure as Russia.…”

International trade and foreign direct investment as growth stimulators in transition economies: does the impact of institutional factors matter?

“…First, most of the empirical studies apply the European Bank for Reconstruction and Development (EBRD) indicators as a variable to account for institutions quality and transition progress. In this cluster of studies, we can distinguish some of the earliest and prominent studies by de Melo et al (1996), Sahay et al (1999), and Sachs (2001) alongside with some recent empirical works of Nath (2009), Josifidis et al (2012), Melnyk et al (2014). However, it is widely accepted that EBRD proxies assess merely reforms in the area of infrastructure and financing, hence, they do not wholly meet the requirements to be indicators of institutional quality.…”