Determinants of economic growth in transition economies —an empirical analysis of changes from the first to the second decade of transition

This thesis strives to explore changes in determinants of transition economies’ growth from the early to the latter phase of transition. To realize this goal, two panel data analyses are conducted with the data of 25 transition economies for growth during 1990-1999 as the recession and early recovery period of transition, and growth during 2000-2009 as the stable growth period of transition. The results of the empirical study and a comparative analysis of the results reveal significant changes in driving forces of growth during the two periods with main findings listed below.For the recession and early recovery period, structural reforms were the main driving forces of growth in transition economies with a lag, and the high inflation rate, government expenditure and initial conditions negatively influenced growth. While during the growth period of transition, investment, openness of the economies represented by trade volumes, and fiscal balance became main factors driving the growth of these transition economies, and the global financial crisis had a negative impact on growth.Combining the growth theory for normally functioning economies and the previous empirical studies for growth in transition economies, a further implication of these results lies in that the transition economies have progressed greatly towards normal market economies. The main driving forces of growth in the transition economies have changed from the efficiency-enhancing structural reforms to traditional input factors of investment and trade with the precondition of a stable macroeconomic situation. And the phenomenon of convergence in economic developed assumed by neoclassical growth theory for normal market economies could also be observed in the second decade of transition, further proving that transition economies began to function more like normal market economies instead of the special transition economies.This thesis strives to explore changes in determinants of transition economies’ growth from the early to the latter phase of transition. To realize this goal, two panel data analyses are conducted with the data of 25 transition economies for growth during 1990-1999 as the recession and early recovery period of transition, and growth during 2000-2009 as the stable growth period of transition. The results of the empirical study and a comparative analysis of the results reveal significant changes in driving forces of growth during the two periods with main findings listed below.For the recession and early recovery period, structural reforms were the main driving forces of growth in transition economies with a lag, and the high inflation rate, government expenditure and initial conditions negatively influenced growth. While during the growth period of transition, investment, openness of the economies represented by trade volumes, and fiscal balance became main factors driving the growth of these transition economies, and the global financial crisis had a negative impact on growth.Combining the growth theory for normally functioning economies and the previous empirical studies for growth in transition economies, a further implication of these results lies in that the transition economies have progressed greatly towards normal market economies. The main driving forces of growth in the transition economies have changed from the efficiency-enhancing structural reforms to traditional input factors of investment and trade with the precondition of a stable macroeconomic situation. And the phenomenon of convergence in economic developed assumed by neoclassical growth theory for normal market economies could also be observed in the second decade of transition, further proving that transition economies began to function more like normal market economies instead of the special transition economies