Transition of Central and Eastern European countries into market economy

Abstract

This paper analyze economic growth during the transition from centrally planned to market economy in Central and Eastern European and former Soviet Union countries. It provides a descriptive analysis of regional growth performance vis-a-vis countries at similar levels of different factors that have been identified in the cross-country literature as being associated with economic growth. Several points of controversy emerged within the overall stately, particularly over so-called shock therapy, and over sequencing. Rapid policy action was possible in some areas of reform - price and trade liberalization, and inflation stabilization, and perhaps small scale privatization - but in others it was clear that reform would take a long time. The controversies over shock treatment related mainly to macroeconomic stabilization and the pace at which privatization could be attempted, and to a lesser extant, over the pace of trade liberalization for some reason there was less controversy over the pace of trade liberalization. On sequencing the argument was that some reforms were preconditions for others - for instance that privatization would fail unless the right legal framework or financial system or both were in place, or that price decontrol should non take place until macroeconomic stabilization could be assured. After a brief assessment of the extent to which economic growth has been associated with progress on different measures of well being, the paper concludes with a list suggested issues to be investigated in the context of specific country studies.