Abstract
The paper is looking for the reasons of the growth differences in transition economies. Empirical analyses justify that GDP growth is higher in countries where state reallocation is decreasing and where a tight fiscal policy has been kept. We can identify several budget restrictions that have expansionary effects, especially in the case of considerable cuts in budget deficits. These non-Keynesian results fit the earlier consequents of Alesina, Perotti and Giavazzi for OECD countries.
Highlights
The collapse of socialist economies in Eastern Europe and the former Soviet Union, as well as their subsequent transition towards market economies were arguably among the most far-reaching economic events of the 20th century
The growth performance in transition economies was widely different by countries
Even if the initial conditions did not give the same possibilities to governments, early reforms opened the way to market processes, which seems to be more efficient than state-owned institutions in transition economies
Summary
The collapse of socialist economies in Eastern Europe and the former Soviet Union, as well as their subsequent transition towards market economies were arguably among the most far-reaching economic events of the 20th century. Even if the initial conditions did not give the same possibilities to governments, early reforms opened the way to market processes, which seems to be more efficient than state-owned institutions in transition economies. In this context, the lower the state participation, the highest is growth. We can identify several budget restrictions that have expansionary effects, especially in the case of considerable cuts in budget deficits (decisive cuts in budget expenditures) These results fit the earlier conculusions of Alesina, Perotti and Giavazzi for OECD countries. I make a conclusion on identifiable effects of fiscal policy in transition economies
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