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Vol. 67, No. 4, pp. 326-338 (2016)

“Determinants of Decline and Growth in Transition Economies: A Meta-Analysis of the Transition Literature”
Ichiro Iwasaki (Institute of Economic Research, Hitotsubashi University), Kazuhiro Kumo (Institute of Economic Research, Hitotsubashi University)

The economies of Central East European and former Soviet states have experienced catastrophic downturns in the first years of transition to the market economy and moderate recovery in the aftermath of the crisis. Previous studies, however, do not clarify the reasons why the transition economies followed a J-shaped path of macroeconomic decline and growth without exception. Aiming to illustrate the mechanism, we conducted a meta-analysis of the transition literature that empirically examined the determinants of macroeconomic growth in transition economies. The results of meta-synthesis of collected estimates indicate that hyperinflation and regional conflicts were strong factors causing the economic crisis during the initial period of transition, while the changes in socio-economic structure and the transformation policies had weaker effects on economic growth. We also found that the economies with heavier socialist legacies were forced to face deeper economic decline, if other conditions are equal.