The Relationship between Economic Growth and the Speed of Liberalization During Transition

The paper examines existing results on the effects of the speed of liberalization on growth performance during transition. We highlight methodological problems in these studies, noting the existence of simultaneous causation and the use of variables that are not valid measures of the phenomena they supposedly represent. We implement solutions, examining the simultaneous relationship between growth and speed of liberalization. Initial conditions are much more important than policy changes in determining growth performance in the first four years of transition. Growth performance during the early years of transition has a strong effect on liberalization speed