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Mr. Reza Moghadam

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

Ms. Ratna Sahay, Mr. Carlos A. Végh Gramont, and Mr. Stanley Fischer

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

Ms. Ratna Sahay, Mr. Carlos A. Végh Gramont, and Mr. Stanley Fischer
The current destination of Central and Eastern European countries—explicitly for some, implicitly for all—is Brussels. The concept of the distance from Brussels is multi-dimensional. One simple measure, not without theoretical and empirical justification, is physical distance. This paper’s focus, however, lies more in the distances in time and economic space. The paper first compares income gaps between Central and Eastern European and European Union (EU) countries, then evaluates recent economic performance in Central and Eastern Europe in light of EU standards. Finally; addresses the question of how long it will take the Central and Eastern European countries to close the income gap with EU countries.
Ms. Ratna Sahay, Mr. Carlos A. Végh Gramont, and Mr. Stanley Fischer

(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

International Monetary Fund. External Relations Dept.

. 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

International Monetary Fund

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

International Monetary Fund

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

Mr. Torsten M Sloek
This paper analyzes monetary policy in transition. It examines the dynamics of monetary policy in Mongolia using granger-causality tests for monetary variables and inflation. The paper also analyzes money demand using data from 22 Mongolian regions during 1993-1998. The analyses confirm the key role of monetary policy in stabilization and reveal that even in a transition economy as rudimentary as Mongolia, a stable money demand and a predictable relationship between inflation and monetary variables do exist. Hence market-based monetary policy is effective. In addition, the analysis points to a difference between transition and industrial economies in the elasticity of money demand with respect to activity, reflecting the larger role for transactions demand for money.