Stanley Fischer and Ratna Sahay1 INTRODUCTION Economic performance among the transition economies (TEs) of Central and Eastern Europe (CEE) and the former Soviet Union (FSU) has differed widely in the ten years since the start of the Polish economic reform programme. The countries that have done best are those who have pursued their reform agendas most consistently; they are also those who seemed from the start most committed to reform.2 By and large, they are also the countries closest to Western Europe, and those who had spent the least time under communist rule. Figure 1.1 presents charts of output levels in transition time for the 25 TEs studied in this chapter.3 Output declined in all countries in the initial years of transition. However, the more successful have been growing since the mid1990s, and several are well on their way towards joining the European Union (EU). Although they still confront many reform tasks, they have graduated from the ranks of TEs. Output in the least successful countries continued to decline virtually every year, and most of them still face many of the challenges of transition. In this chapter we first summarize the macroeconomic performance of TEs. We then try to account for the widely differing outcomes in the 25 countries. We start by reviewing the initial conditions confronting these economies, and the reform strategy that was proposed a decade ago, as well as some of the associated controversies. We then provide an analysis of the determinants of economic growth, which is...
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