## Stabilization and Growth in Transition Economies: The Early Experience

_IMF Working Papers, April 1, 1996_

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## Bibliographic details
- Authors: Stanley Fischer, Carlos A. Végh Gramont, Ratna Sahay
- Published: April 1, 1996
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781451980042.001

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### Scope and data
- Analysis covers 26 transition economies in eastern Europe, the former Soviet Union, and Mongolia for the period 1989-1994.
- Working Paper details:
  - Authors: Stanley Fischer, Carlos A. Végh Gramont, Ratna Sahay
  - Date: April 1, 1996
  - Pages: 32
  - Series: Working Paper No. 1996/031
  - Issue: 031
  - Volume: 1996
  - DOI: https://doi.org/10.5089/9781451980042.001
  - Stock No: WPIEA0311996
  - ISBN: 9781451980042
  - ISSN: 1018-5941

### Key empirical findings
- Inflation outcomes:
  - Inflation rates have declined significantly in most countries following an inflation stabilization program.
- Growth dynamics:
  - Growth resumes after stabilization occurs, typically with a lag of about two years.
  - Reducing inflation thus appears to be a precondition for growth.
- Econometric results on short-run determinants of inflation and growth:
  - Fixed exchange rates play a key role in lowering inflation and spurring growth.
  - Improved fiscal balances contribute to both lower inflation and higher growth.
  - Structural reforms are important for spurring growth and lowering inflation.
  - Inflation stabilization programs have been beneficial for growth even after controlling for structural reforms.

### Policy implications and recommendations
- Prioritize credible inflation stabilization programs as a necessary step toward restoring growth.
- Consider exchange rate arrangements (including fixed exchange rates) as part of a stabilization strategy to reduce inflation.
- Strengthen fiscal positions to support disinflation and subsequent growth.
- Implement structural reforms alongside stabilization policies to enhance growth prospects.
- Design stabilization packages that combine fiscal consolidation, exchange rate policy, and structural reform to maximize the likelihood of growth resumption.

*Source: Stabilization and Growth in Transition Economies: The Early Experience, IMF Working Paper No. 1996/031 (April 1, 1996).*

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_Source: https://www.imf.org/en/publications/wp/issues/2016/12/30/stabilization-and-growth-in-transition-economies-the-early-experience-1929_