Stabilization and Growth in Transition Economies: The Early Experience

Author/Editor:

Stanley Fischer ; Carlos A. Végh Gramont ; Ratna Sahay

Publication Date:

April 1, 1996

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:

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.

Series:

Working Paper No. 1996/031

Subject:

Exchange rate arrangements Fiscal policy Fiscal stance Foreign exchange Government debt management Inflation Prices Public financial management (PFM) Purchasing power parity

English

Publication Date:

April 1, 1996

ISBN/ISSN:

9781451980042/1018-5941

Stock No:

WPIEA0311996

Pages:

32

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