the first decade in transition
TRANSCRIPT
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How did transition economies perform?
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INTRODUCTION Output fell sharply
Private enterprises overtook the statesector
Exports rose-Moving toward industrialcountries
Poverty increased sharply
Average poverty rates (1990-1998)
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Explaining variation in output performance
Initial conditions
External economic shocks
Policies
What initial conditions matter
Conclusion
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Output Fell Sharply Onset of the transition there was a sharp
initial fall
On the next page the figure shows usthis initial fall
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Then fast recovery and sustainable growthfollowed
Another page shows us this situation
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The CIS had an average of 6.5 years ofdeclining output
The CIS had recovered only 63 percent of itsstarting GDP values
Poland had the shortest and mildest
recession Armenia, Georgia and Moldova saw the
steepest declines
Industry and agriculture declined by about 9percent of GDP in CIS
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Industry Shrank and ServicesGrew CSB and CIS shifted to market economy
These two groups had economicliberalization
Industry shrank and services grew
The table show us this situation
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Private Enterprises Overtook theState Sector After shifted to market economy, private
sector grew
Show as:
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Export Rose-Moving TowardIndustrial Countries The most important things in this part
are;
With new technology to modernize
industries and extract natural resources Between 1996-1999 more than $ 70
billion indirect investment came to CSBcountries
Secondly CIS foreign direct investmentwas confined to the energy richcountries
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Poverty Increased Sharply andAverage Poverty Rates In the transition period was still one of
extreme hardship for many people
Except Easttern Europe and Central
Asia poverty rates decreased in 1998
Not only fall in output but also inequalityin the distribution of income
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Explaining Variations in OutputPerformance Explanations of economic outcomes can
listed as;
1) the characterstics of countries at the
beginning of transition2) the shocks resulting from the
breakdown of the central planing system
3) the dissolution of the Soviet Union
4) wars and civil strife
5) the policies to make easy the transition
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Did Initial Conditions AffectPerformance? Some conditions may have affected
economic performance. Theseconditions are listed as;
1) geography
2) years spent under central planing
3) the nature of economic development
under socialism
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Melo, Denizer and Gelb used someindicators
Influence of initial conditions on theeconomic performance
These indicators are;
*structure*distortions
*instutions
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These indicators include some variables toeach other:
1) Structure
* share of industry in GDP
* degree of urbanization* trade dependence
* natural resource endowment
* income
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2) Distortions
* repressed inflation
* black market exchange rates
* terms of trade loss for the CIS* reform history
* pretransition growth rate
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3) Instutions
* market memory
* location* new states
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External Economic ShocksDelayed Recory There is severe shocks. These shocks
are listed as;
* Financial crises of the 1990s (Mexico,
East Asia and Russia)
* War and civil strife (Armenia,Azerbaijan and Tajikistan 1992-94,
Georgia and Moldova in 1992, Croatiaand FYR Macedonia in 1991-94)
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Policies Do They Matter? There should be reforms
These reforms ought to be broadconsensus
* macroeconomic stabilization
* price and trade liberalization
* imposition of hard budget constraints
on banks and enterprises
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* enabling environment for private sectordevelopment
* reform of the tax system
* legal and judicial reform
* reform of the public sector instutions
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The extent of economic policy reform couldbe measured by liberalization index
measures reforms for allocating resources
includes reforms to maintain the efficientfunctioining of markets
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What Initial Conditions Matterand When Do They Matter? Initial conditions are more important
factors
Initial conditions explains economic
growth during 1990-1994 with 51percent
During the decade, initial conditions
define average growth 41 percent
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Conclusion Initial conditions can not be changed
However policies can be advanced
Effective and modern public economyshould composed
Instutional arrangements should bedone
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Compliance costs should be decreased Local and small businesses complain to
defraudation
CSB countries which had good initialconditions and with radical decisionswere successful
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CIS countries could not achieve theevolution of democracy
Also these countries were unsuccessful
to make reforms They are not close to the Western
markets
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Thanks for your listening