This book contains 21 papers focusing on a wide range of issues concerning financial sector transition in the countries of Europe and Central Asia (ECA). It places the transition economies in the context of recent and prospective developments in global financial markets. This book also evaluates the experience of the last 10 years and reviews the progress from a command financial system to a market-based one, identifying some of the key characteristics of the financial transition.
This paper analyzes fiscal reforms in transition economies during the decade leading up to 1998. The paper argues that macroeconomic stabilization, price liberalization and privatization--he core reforms visualized by the shock therapy approach--are necessary but not sufficient conditions for a complete transition to a market economy. Further deep changes--such as the creation of new fiscal institutions, changes in incentives and processes, and changes in the role of government--are needed.
This paper explores how fiscal policy can affect medium- to long-term growth. It identifies the main channels through which fiscal policy can influence growth and distills practical lessons for policymakers. The particular mix of policy measures, however, will depend on country-specific conditions, capacities, and preferences. The paper draws on the Fund’s extensive technical assistance on fiscal reforms as well as several analytical studies, including a novel approach for country studies, a statistical analysis of growth accelerations following fiscal reforms, and simulations of an endogenous growth model.
'Frank Bönker has done a masterful job. . . This is probably the best book available on this important subject. and its significance is not limited to studies of postcommunist societies. It has important theoretical implications for everyone interested in the Political Economy of Policy Reform perspective within the field of comparative political economy.' - John L. Campbell, Slavic Review
This thought-provoking book investigates the political and economic transformation that has taken place over the past three decades in Central, Eastern and Southeastern Europe (CESEE) since the fall of the Iron Curtain. Through an examination of both the successes and shortcomings of post communist reform and the challenges ahead for the region, it explores the topical issues of economic transition and integration, and highlights lessons to be learned.
This report focuses upon aspects of energy production, consumption and efficiency within the transition economies of the countries in central eastern Europe and the Baltic states, south-eastern Europe and the Commonwealth of Independent States. The report is divided into two sections. Part I considers issues of macroeconomic performance and future prospects for growth. Part II contains an analysis of the primary and secondary energy sectors in these countries. The report highlights the challenges facing the energy-rich countries in managing their resources prudently. It discusses key policy issues, such as the need to strengthen governance and transparency in the energy sector, and to increase savings to preserve national wealth for future generations. It also looks at tariff reform as a means of improving energy efficiency, and examines ways of ensuring that the poor do not suffer as a result of tariff adjustments. It highlights the complementary role that private investment in the power sector can play in improving energy efficiency, if accompanied by a strong regulatory framework. The report also contains an assessment of the progress towards transition made by each country, on a range of areas including liberalisation and macroeconomic stabilisation.
A noted Chinese economist examines the mechanisms behind China's economic reforms, arguing that universal principles and specific implementations are equally important. As China has transformed itself from a centrally planned economy to a market economy, economists have tried to understand and interpret the success of Chinese reform. As the Chinese economist Yingyi Qian explains, there are two schools of thought on Chinese reform: the “School of Universal Principles,” which ascribes China's successful reform to the workings of the free market, and the “School of Chinese Characteristics,” which holds that China's reform is successful precisely because it did not follow the economics of the market but instead relied on the government. In this book, Qian offers a third perspective, taking certain elements from each school of thought but emphasizing not why reform worked but how it did. Economics is a science, but economic reform is applied science and engineering. To a practitioner, it is more useful to find a feasible reform path than the theoretically best way. The key to understanding how reform has worked in China, Qian argues, is to consider the way reform designs respond to initial historical conditions and contemporary constraints. Qian examines the role of “transitional institutions”—not “best practice institutions” but “incentive-compatible institutions”—in Chinese reform; the dual-track approach to market liberalization; the ownership of firms, viewed both theoretically and empirically; government decentralization, offering and testing hypotheses about its link to local economic development; and the specific historical conditions of China's regional-based central planning.
In light of the persistence of moderate inflation in many transition economies, this paper analyzes whether inflation resulted from insufficiently tight financial policies and wage pressures or from the protracted adjustment of relative prices. Using a new database for 21 countries, the effect of relative price variability on inflation is estimated within a framework controlling for nominal and real shocks. Money and wage growth were the most important determinants of inflation; relative price variability had a sizable effect at high inflation during initial liberalization and a small effect at moderate inflation. Cost recovery may contribute to variability, particularly in the advanced stages of the transition.
