The Effect of Sequence of Policies and Speed of Reforms on Economic Growth in the Countries in Transition

Economic reforms require a comprehensive and detailed strategy to specify when and how policy reforms should be applied. Since economic reforms are comprised of different measures such as price liberalization, privatization, trade and foreign currency reform, restructuring of enterprises and etc., the sequence of these policies should be specified, and must be determined how fast each of these policies should be followed. Unfortunately, lack of statistical evidence has hindered a strong evidence-based analysis. In this research, the indicators of economic reforms, provided by the European Bank for Reconstruction and Development (EBRD) in 8 sectors and 29 transition economies over 24 years, have been analyzed through a panel data model with EGLS method. As for the sequence of policies, it is determined that the price liberalization and the small enterprises’ privatization (rather than large ones) are the most important parts of the economic reforms to achieve economic growth. However, as for the speed of adjustments, the results indicate that speeding up price liberalization and privatization lead to slow economic growth, whereas accelerating the reforms in trade and foreign exchange policies, and also stepping up the restructuring of firms, promote economic growth.