Degree Name

Master of Arts (MA)

Semester of Degree Completion

2017

Thesis Director

Noel Brodsky

Abstract

The present study provides with the most recent summary of growth performance in transition countries after 25 years since the change of the regime. The empirical analysis estimates growth, applying Generalized Least Squares (GLS) estimation technique using a panel of 26 transition countries for the period of 25 transition years (1990-2014). Empirical findings of this study confirm that growth performance can be explained by the degree of structural reforms, stabilization, and initial conditions along with other factors (external growth, regional tensions, government expenditure, and oil balance). Even if initial conditions are important for growth, its influence consistently declines.

The transition is mainly driven by reforms, which are positively correlated with favorable initial conditions and high political competition (democracy). We have found that the higher the speed of reforms, the higher is economic growth in transition countries. However, the level of democratization plays a vital role in the choice of transition path of a country. The study confirmed a positive impact of macroeconomic stabilization, investment, and external growth on economic growth in transition countries, whereas government expenditure turned out to have an adverse impact on growth. Our main results are consistent with the previous studies; however, unlike most other papers, this study confirms the significance of investment and government expenditure in the growth model. This study lays the foundation for further research in the area and should be of value to local policy-makers.

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