Market Reforms and Growth in Post-Socialist Economies: Evidence from Panel Cointegration and Equilibrium Correction Model

27 Pages Posted: 7 Dec 2008

See all articles by Igor Pelipas

Igor Pelipas

Independent

Alexander Chubrik

CASE - Center for Social and Economic Research; IPM Research Center

Date Written: September 2008

Abstract

In this paper the impact of market reforms on economic growth has been analyzed using the panel data for 26 post-socialist economies over the period between 1989 and 2005. Taking into account the dynamic properties of the data, the concepts of cointegration and equilibrium correction model for panel data has been used as the analytical framework. First, well-specified regression models have been obtained. Second, long and short run aspects of 'reforms-growth' relationship have been considered. Out analysis has detected the existence of cointegration between the level of ERBD reform index and the level of real GDP per capita. This is interpreted as the presence of the long run relationship between these indicators. Third, it has been found that there is a statistically significant positive influence of economic reforms on economic growth in the long run. In addition, market reforms positively influence economic growth in the short-run, but with a one-year lag. The equilibrium correction mechanism in corresponding regressions reflects existing biases of the analyzed indicators from the equilibrium trajectory, as well as direction and speed of adjustment to this trajectory. Our approach to modeling of the relationship between market reforms and economic growth explains a puzzle of high rates of economic growth in some countries with a relatively low level of ERBD reform index. Finally, in contrast to other studies employing a different methodology, statistically significant influence of economic growth on market reforms has been established both in the long and short run, our study shows that there is no such relationship.

Keywords: post-socialist economies, market reforms, economic growth, panel cointegration

JEL Classification: C23, C33, P21, P30

Suggested Citation

Pelipas, Igor and Chubrik, Alexander, Market Reforms and Growth in Post-Socialist Economies: Evidence from Panel Cointegration and Equilibrium Correction Model (September 2008). William Davidson Institute Working Paper No. 936, Available at SSRN: https://ssrn.com/abstract=1311526 or http://dx.doi.org/10.2139/ssrn.1311526

Alexander Chubrik

CASE - Center for Social and Economic Research ( email )

Al. Jana Pawła II 61/212
Warsaw, 01-031
Poland

HOME PAGE: http://case-research.eu/strona--ID-strona_glowna,nlang-710.html

IPM Research Center ( email )

50b Zakharova St
Minsk, 220088
Belarus

HOME PAGE: http://research.by/

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