Stabilization and Growth in Transition Economies: The Early Experience

Stanley Fischer, Carlos Végh Gramont and Ratna Sahay

No 1996/031, IMF Working Papers from International Monetary Fund

Abstract: This paper analyzes the growth and stabilization experience in 26 transition economies in eastern Europe, the former Soviet Union, and Mongolia for the period 1989-1994. Inflation rates have declined significantly in most countries following an inflation stabilization program. Growth resumes after stabilization occurs, typically with a lag of about two years. Reducing inflation thus appears to be a precondition for growth. An econometric analysis of the short-run determinants of inflation and growth illustrates the key roles of fixed exchange rates, improved fiscal balances, and structural reforms in spurring growth and lowering inflation, and confirms that inflation stabilization programs have been beneficial for growth even after controlling for structural reforms.

Keywords: WP; country; economy; government; transition economy; inflation estimation result; inflation stabilization; stabilization package; output decline; inflation regression; FSU country; Inflation; Exchange rate arrangements; Government debt management; Purchasing power parity; Fiscal stance; Eastern Europe; Baltics (search for similar items in EconPapers)
Pages: 32
Date: 1996-04-01
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Citations: View citations in EconPapers (188)

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