Reforms and Economic Growth in Transition Economies: Complementarity, Sequencing and Speed

35 Pages Posted: 19 Sep 2007

See all articles by Karsten Staehr

Karsten Staehr

Tallinn University of Technology (TUT) - Department of Finance and Economics; Bank of Estonia

Date Written: January 23, 2003

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

JEL Classification: P21, P30, C33, H11

Suggested Citation

Staehr, Karsten, Reforms and Economic Growth in Transition Economies: Complementarity, Sequencing and Speed (January 23, 2003). BOFIT Discussion Paper No. 1/2003, Available at SSRN: https://ssrn.com/abstract=1015454 or http://dx.doi.org/10.2139/ssrn.1015454

Karsten Staehr (Contact Author)

Tallinn University of Technology (TUT) - Department of Finance and Economics ( email )

Akadeemia tee 3-486
Tallinn, 12618
Estonia

HOME PAGE: http://www.ttu.ee/karsten-staehr

Bank of Estonia ( email )

Estonia Building 13
Tallinn, 15095
Estonia

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