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THE FIRST DECADE IN TRANSITION

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Title: THE FIRST DECADE IN TRANSITION Author: Gurkan Last modified by: windows Created Date: 10/15/2009 1:14:10 PM Document presentation format: Ekran G sterisi – PowerPoint PPT presentation

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Title: THE FIRST DECADE IN TRANSITION


1
THE FIRST DECADE IN TRANSITION
2
INTRODUCTION
  • Output fell sharply
  • Private enterprises overtook the state sector
  • Exports rose-Moving toward industrial countries
  • Poverty increased sharply
  • Average poverty rates (1990-1998)

3
  • Explaining variation in output performance
  • Initial conditions
  • External economic shocks
  • Policies
  • What initial conditions matter
  • Conclusion

4
Output Fell Sharply
  • Onset of the transition there was a sharp initial
    fall
  • On the next page the figure shows us this initial
    fall

5
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6
  • Then fast recovery and sustainable growth
    followed
  • Another page shows us this situation

7
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8
  • The CIS had an average of 6.5 years of declining
    output
  • The CIS had recovered only 63 percent of its
    starting GDP values
  • Poland had the shortest and mildest recession
  • Armenia, Georgia and Moldova saw the steepest
    declines
  • Industry and agriculture declined by about 9
    percent of GDP in CIS

9
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10
Industry Shrank and Services Grew
  • CSB and CIS shifted to market economy
  • These two groups had economic liberalization
  • Industry shrank and services grew
  • The table show us this situation

11
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12
Private Enterprises Overtook the State Sector
  • After shifted to market economy, private sector
    grew
  • Show as

13
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14
Export Rose-Moving Toward Industrial Countries
  • The most important things in this part are
  • With new technology to modernize industries and
    extract natural resources
  • Between 1996-1999 more than 70 billion indirect
    investment came to CSB countries
  • Secondly CIS foreign direct investment was
    confined to the energy rich countries

15
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16
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17
Poverty Increased Sharply and Average Poverty
Rates
  • In the transition period was still one of extreme
    hardship for many people
  • Except Easttern Europe and Central Asia poverty
    rates decreased in 1998
  • Not only fall in output but also inequality in
    the distribution of income

18
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19
Explaining Variations in Output Performance
  • Explanations of economic outcomes can listed as
  • 1) the characterstics of countries at the
    beginning of transition
  • 2) the shocks resulting from the breakdown of
    the central planing system
  • 3) the dissolution of the Soviet Union
  • 4) wars and civil strife
  • 5) the policies to make easy the transition

20
Did Initial Conditions Affect Performance?
  • Some conditions may have affected economic
    performance. These conditions are listed as
  • 1) geography
  • 2) years spent under central planing
  • 3) the nature of economic development under
    socialism

21
  • Melo, Denizer and Gelb used some indicators
  • Influence of initial conditions on the economic
    performance
  • These indicators are
  • structure
  • distortions
  • instutions

22
  • These indicators include some variables to each
    other
  • 1) Structure
  • share of industry in GDP
  • degree of urbanization
  • trade dependence
  • natural resource endowment
  • income

23
  • 2) Distortions
  • repressed inflation
  • black market exchange rates
  • terms of trade loss for the CIS
  • reform history
  • pretransition growth rate

24
  • 3) Instutions
  • market memory
  • location
  • new states

25
External Economic Shocks Delayed Recory
  • There is severe shocks. These shocks are listed
    as
  • Financial crises of the 1990s (Mexico, East
    Asia and Russia)
  • War and civil strife (Armenia, Azerbaijan and
    Tajikistan 1992-94, Georgia and Moldova in 1992,
    Croatia and FYR Macedonia in 1991-94)

26
Policies Do They Matter?
  • There should be reforms
  • These reforms ought to be broad consensus
  • macroeconomic stabilization
  • price and trade liberalization
  • imposition of hard budget constraints on banks
    and enterprises

27
  • enabling environment for private sector
    development
  • reform of the tax system
  • legal and judicial reform
  • reform of the public sector instutions

28
  • The extent of economic policy reform could be
    measured by liberalization index
  • measures reforms for allocating resources
  • includes reforms to maintain the efficient
    functioining of markets

29
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30
What Initial Conditions Matter and When Do They
Matter?
  • Initial conditions are more important factors
  • Initial conditions explains economic growth
    during 1990-1994 with 51 percent
  • During the decade, initial conditions define
    average growth 41 percent

31
Conclusion
  • Initial conditions can not be changed
  • However policies can be advanced
  • Effective and modern public economy should
    composed
  • Instutional arrangements should be done

32
  • Compliance costs should be decreased
  • Local and small businesses complain to
    defraudation
  • CSB countries which had good initial conditions
    and with radical decisions were successful

33
  • CIS countries could not achieve the evolution of
    democracy
  • Also these countries were unsuccessful to make
    reforms
  • They are not close to the Western markets

34
  • Thanks for your listening
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