The Evolution of Output in Transition Economies: Explaining the Differences

By Ratna Sahay, Jeromin Zettelmeyer, Eduardo Borensztein, Andrew Berg

May 1, 1999

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Ratna Sahay, Jeromin Zettelmeyer, Eduardo Borensztein, and Andrew Berg. The Evolution of Output in Transition Economies: Explaining the Differences, (USA: International Monetary Fund, 1999) accessed December 22, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

What are the relative roles of macroeconomic variables, structural policies, and initial conditions in explaining the time path of output in transition and the large observed differences in output performance across transition economies? Using a sample of 26 countries, this paper follows a general-to-specific modeling approach that allows for differential effects of policies and initial conditions on the private and state sectors and for time-dependent effects of initial conditions. While showing some fragility to model specification, the results point to the preeminence of structural reforms over both initial conditions and macroeconomic variables in explaining cross-country differences in performance and the timing of the recovery.

Subject: Economic sectors, Fiscal policy, Fiscal stance, Inflation, Macrostructural analysis, Prices, Production, Production growth, Public sector, Structural reforms

Keywords: Baltics, BRO country, Central and Eastern Europe, Country dummy, Data set, Eastern Europe, Effects of policy, Fiscal stance, Growth, Growth model, Inflation, Initial condition, Macro policy, Macroeconomic variable, Model gB, Models gA, Output decline, Policy indices, Policy variable, Private sector, Private sector effect, Production growth, Public sector, Recovery, Regression model, Structural reforms, Transition economies, WP

Publication Details

Pages:

81
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 1999/073
Stock No:

WPIEA0731999
ISBN:

9781451849448
ISSN:

1018-5941

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