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Institutional Deterioration in Transition Economies: Playing Follow-the-Leader During the Global Financial Crisis?

  • World Transition Economy Research
  • Published:
Transition Studies Review

Abstract

Economic transition was a systemic change of institutions from those that facilitated a planned, communist economy to those suitable for a market economy. This paper examines the state of this political and economic institutional development in 28 transition economies, focusing on the global financial crisis years of 2007–2012. According to various metrics of institutions, institutional regression has indeed occurred but has been somewhat localized in the countries of the CIS. However, property rights have regressed in some countries in Central/Southern Europe, while financial sector institutions have uniformly degraded across the entire transition space.

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Notes

  1. A complete list of indicators used in this paper is shown in Table 3 in the Appendix, but they include commonly-cited indices of institutional quality, such as those from the World Bank, the International Country Risk Guide (ICRG), and the Polity IV political institutions database.

  2. Given the scaling differences between the absolute indicator changes and that of contract-intensive money, contract intensive money in Fig. 2 is shown as a percentage change while the other indicators are absolute.

  3. Wording taken from the EBRD website, http://www.ebrd.com/pages/research/economics/data/macro/ti_methodology.shtml. Accessed 21 January, 2013.

  4. Contract-intensive money measures the amount of money held outside of the formal financial sector, on the basis that less secure property rights would lead to less money held in banks. It is defined further in Table 3 in the Appendix.

  5. The purpose of this brief examination is also not to open an intense debate on econometric methodology, which would obscure the key issue at hand. Rather, the purpose is to bring statistical clarity to the issues discussed above and provide some empirical heft for the effects that institutional regression would have.

  6. Change in quarterly growth rates is utilized due to non-stationarity in the series, corrected by differencing.

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Authors and Affiliations

  1. Institute for Emerging Market Studies (IEMS), Moscow School of Management-SKOLKOVO, Moscow, Russia

    Christopher A. Hartwell

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  1. Christopher A. Hartwell
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Correspondence to Christopher A. Hartwell.

Appendix

Appendix

See Appendix Table 3.

Table 3 Institutional indicators
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Hartwell, C.A. Institutional Deterioration in Transition Economies: Playing Follow-the-Leader During the Global Financial Crisis?. Transit Stud Rev 20, 131–147 (2013). https://doi.org/10.1007/s11300-013-0275-5

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  • DOI: https://doi.org/10.1007/s11300-013-0275-5

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