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The rise in inflation from single to double digits coincided with the onset of Hungary’s transition to a market economy in the late 1980s. Unlike most other transition countries in central and eastern Europe, Hungary had introduced a series of price reforms since the late 1960s; 1 therefore, economic liberalization in the late 1980s and early 1990s did not lead to the explosion in prices seen elsewhere ( Figure 7.1 ). Despite this favorable position, inflation in Hungary has been very sticky. Over the last seven years, it has essentially fluctuated in the 20
I. INTRODUCTION At the end of the 1930s, today’s transition countries in Central and Eastern Europe (CEE) were at very different levels of development. 2 Starting at different times, and to differing extents, all these countries were in the Soviet economic orbit until 1990. With the transition process now well under way, the question is where they are heading and how far down the road they are. The present destination, explicitly for some, implicitly for all, is Brussels. 3 The concept of the distance from Brussels is multi-dimensional. One simple
(Projected Per Capital Growth) References Summary At the end of the 1930s, today’s transition countries in Central and Eastern Europe (CEE) were at very different levels of development. Starting at different times, and to differing extents, all of these countries were in the Soviet economic orbit until 1990. With the transition process now well under way, the question is where they are heading and how far they have reached. The current destination—explicitly for some, implicitly for all—is Brussels. The concept of the distance from Brussels is multi
. Transition economies In his keynote address on transition economies, Joseph Stiglitz said that a decade ago many transition countries in Central and Eastern Europe had been regarded as being “on the cusp of success,” but their future remains bleak today, with Estonia, Hungary, Poland, and Slovenia being the notable exceptions. Russia had done particularly badly; in an apparent contradiction of the laws of economics, it registered simultaneous output declines and increasing inequality of incomes. As a result, the number of Russians living in poverty soared from 2 million
still lag behind those of most other transition countries in Central and Eastern Europe, reflecting mainly the “stop-and-go” approach to reform and macroeconomic stability pursued for much of the past 11 years. They therefore urged the authorities to break decisively with the previous pattern of policymaking and to engage in a sustained and vigorous strategy of stabilization and structural reform, so as to at last achieve a sustainable improvement in living standards and improve prospects for a smooth integration into the European Union (EU). Directors considered
three years. Chapter I discusses the determinants of inflation, which has been the highest among transition countries in central and eastern Europe. It establishes the key role of unit labor costs in driving inflation—a reflection of the unfinished state of restructuring in the economy—as well as of the exchange rate, which in turn has reflected monetary conditions. Chapter IIreviews salient trends in public finance and finds that while important progress has been made—particularly in limiting the overall deficit as well as in tax policy—the fiscal situation remains