de Melo, MarthaDenizer, CevdetGelb, AlanTenev, Stoyan2014-03-042014-03-042001-01World Bank Economic Reviewhttps://hdl.handle.net/10986/17217This article takes an integrated approach to evaluating the interaction of initial conditions, political change, reforms and economic performance in a unified framework covering 28 transition economies in East Asia, Central and Eastern Europe, and the Former Soviet Union (FSU). Initial conditions and economic policy jointly determine the large differences in economic performance among transition economies. Initial conditions dominate in explaining inflation, but economic liberalization is the most important factor determining differences in growth. Political reform emerges as the most important determinant of the speed and comprehensiveness of economic liberalization, raising the important question of what determines political liberalization. Results suggest the importance of the level of development in determining the decision to expand political freedoms.en-USCC BY-NC-ND 3.0 IGOACCOUNTINGADVERSE EFFECTAGRICULTUREANNUAL GROWTHAVERAGE GROWTHBALANCE OF PAYMENTSBANK NOTESBASE YEARBLACK MARKETBLACK MARKET EXCHANGE RATEBLACK MARKET EXCHANGE RATE PREMIUMBLACK MARKET PREMIUMBLACK MARKET PREMIUMSBRAIN DRAINCAPACITY CONSTRAINTCAPITAL ACCUMULATIONCENTRAL BANKSCENTRAL PLANNINGCIVIL LIBERTIESCOMPARATIVE ANALYSISCOUNTRY DUMMYDEFLATORSDEMOCRACYDEMOGRAPHICDEPRECIATIONDEVELOPED COUNTRIESDEVELOPING COUNTRIESDEVELOPMENT ECONOMICSDEVELOPMENT REPORTDEVELOPMENT RESEARCHDIMINISHING RETURNSDISTORTIONDISTORTIONSDOMESTIC CURRENCYDUMMY VARIABLEECONOMETRIC ESTIMATESECONOMETRICSECONOMIC ACTIVITYECONOMIC CONDITIONSECONOMIC DECLINEECONOMIC DEVELOPMENTECONOMIC EQUILIBRIUMECONOMIC GROWTHECONOMIC LIBERALIZATIONECONOMIC LITERATUREECONOMIC OUTCOMESECONOMIC PERFORMANCEECONOMIC POLICIESECONOMIC POLICYECONOMIC SHOCKECONOMIC STAGNATIONECONOMIC SYSTEMSECONOMIES IN TRANSITIONEMPIRICAL RESULTSENDOGENOUS VARIABLEENERGY RESOURCESEQUATIONSERROR TERMERROR TERMSESTIMATION RESULTSEXOGENOUS VARIABLEEXPORTSEXTERNAL TRADEFEDERAL RESERVEFINANCE CORPORATIONFINANCIAL SERVICESFISCAL DEFICITFOREIGN EXCHANGEFOREIGN EXCHANGE MARKETFUNCTIONAL FORMFUTURE RESEARCHGDPGNPGOLDGRAVITY MODELSGROSS DOMESTIC PRODUCTGROWTH EQUATIONGROWTH LITERATUREGROWTH PERFORMANCEGROWTH PROSPECTSGROWTH RATEGROWTH RATESGROWTH TERMHIGH GROWTHHUMAN CAPITALIMBALANCEIMBALANCESIMPORTIMPORTSINCOMEINCOME INEQUALITYINCOME LEVELSINCOMESINDEBTEDNESSINDEPENDENT VARIABLEINDIVIDUAL COUNTRIESINDUSTRIALIZATIONINFLATIONINFLATION PERFORMANCEINFLATIONARY PRESSURESINTERNATIONAL FINANCEINTERNATIONAL TRADELABOR FORCELANDLOCKED COUNTRIESLIBERALIZATIONLONG-RUN GROWTHLOW INFLATIONMACROECONOMIC CONDITIONSMACROECONOMIC REFORMSMACROECONOMIC STABILIZATIONMACROECONOMIC STABILIZATION POLICIESMACROECONOMICSMARGINAL UTILITYMARKET DISTORTIONSMARKET ECONOMIESMARKET ECONOMYMIDDLE-INCOME COUNTRIESMONETARY ECONOMICSMONEY DEMANDMONEY DEMAND FUNCTIONSMONEY SUPPLYNATURAL RESOURCENATURAL RESOURCESNEGATIVE EFFECTNEGATIVE IMPACTOUTPUTOUTPUT GROWTHPER CAPITA INCOMEPER-CAPITA INCOMEPLANNED ECONOMIESPOLICY REFORMSPOLICY RESEARCHPOLICY STANCEPOLITICAL ECONOMYPOLITICAL INSTABILITYPOLITICAL SYSTEMPOOR COUNTRIESPOSITIVE EFFECTSPRIVATE SECTOR DEVELOPMENTPRODUCTIVITYPUBLIC POLICYPURCHASING POWERPURCHASING POWER PARITYREAL GDPREFORM EFFORTSREGRESSION ANALYSISRELATIVE IMPORTANCERICH COUNTRIESSIGNIFICANT EFFECTSLOW GROWTHSOCIAL CAPITALSOCIALIST ECONOMIESSTEADY STATESTRUCTURAL CHARACTERISTICSSUPPLY SHOCKSTAXTRADE FLOWSTRADE PATTERNSTRADE SHOCKTRADING SYSTEMTRANSITION COUNTRIESTRANSITION COUNTRYTRANSITION ECONOMIESTRANSITION PATHTRANSPORTUPWARD PRESSURESURBANIZATIONWAGESWEIGHTSWORLD ECONOMYWORLD PRICESJournal ArticleWorld Bank10.1596/17217