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The Handbook of Political, Social, and Economic Transformation$
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Wolfgang Merkel, Raj Kollmorgen, and Hans-Jürgen Wagener

Print publication date: 2019

Print ISBN-13: 9780198829911

Published to Oxford Scholarship Online: March 2019

DOI: 10.1093/oso/9780198829911.001.0001

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PRINTED FROM OXFORD SCHOLARSHIP ONLINE (oxford.universitypressscholarship.com). (c) Copyright Oxford University Press, 2021. All Rights Reserved. An individual user may print out a PDF of a single chapter of a monograph in OSO for personal use. date: 22 June 2021

Strategies of Economic Transformation

Strategies of Economic Transformation

Chapter:
(p.661) Chapter 77 Strategies of Economic Transformation
Source:
The Handbook of Political, Social, and Economic Transformation
Author(s):

Vladimir Popov

Publisher:
Oxford University Press
DOI:10.1093/oso/9780198829911.003.0077

The collapse of output during transition can be best explained as an adverse supply shock caused mostly by a change in relative prices after their deregulation due to distortions in industrial structure and trade patterns accumulated during the period of central planning (additional adverse supply shocks came from the collapse of state institutions), while the speed of liberalization, to the extent that it was endogenous, i.e., determined by political economy factors, had an adverse effect on performance. At the recovery stage, in contrast, the ongoing liberalization starts to affect growth positively, while the impact of pre-transition distortions disappears. Institutional capacity and reasonable macroeconomic policy, however, continue to be important prerequisites for successful performance.

Keywords:   shock therapy, gradual transition, transformational recession, institutional capacity, democratization

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