BOFIT Discussion Papers, Institute for Economies in Transition, Bank of Finland
No 1/2003:
Reforms and economic growth in transition economies: Complementarity, sequencing and speed
Karsten Staehr ()
Abstract: Growth regressions have provided important insights into
the impact of economic reforms on growth in transition economies. Using
principal components to decompose reform variables and construct reform
clusters, we address unsettled issues such as the importance of sequencing
and reform speed. The results indicate a broad-based reform policy is good
for growth, but so is a policy of liberalisation and small-scale
privatisation without structural reforms. Conversely, large-scale
privatisation without adjoining reforms, market opening without supporting
reforms and bank liberalisation without enterprise restructuring affect
growth negatively. Swift reform policies allow transition countries to
benefit from higher growth for a longer period of time. The speed of
reforms otherwise appears to have only limited effects on short-term and
medium-term growth.
Keywords: economic reforms; growth; principal components; gradualism versus big-bang; (follow links to similar papers)
JEL-Codes: C33; H11; P21; P30; (follow links to similar papers)
35 pages, January 3, 2003
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