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How I Learned to Stop Worrying and Love the Crisis

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  • Jan Fidrmuc
  • Ariane Tichit

Abstract

We investigate the effects of economic crises on the subsequent economic performance, economic reform, democratization and institutional change. Our analysis is based on a sample of post-communist countries, most of which experienced severe economic crises during the 1990s. We find that the severity of crisis has had a positive impact on the subsequent pace of economic reform, economic growth and, with a delay, on investment and institutional change. Episode of high inflation, moreover, translate into lower subsequent inflation. Crises thus appear to serve as catalysts of reform and institutional change and lead to better long-term economic performance.

Suggested Citation

  • Jan Fidrmuc & Ariane Tichit, 2012. "How I Learned to Stop Worrying and Love the Crisis," CESifo Working Paper Series 3720, CESifo.
    • Handle: RePEc:ces:ceswps:_3720
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    More about this item

    Keywords

    crisis; transition; growth; inflation; reform; institutions;
    All these keywords.

    JEL classification:

    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
    • P27 - Political Economy and Comparative Economic Systems - - Socialist and Transition Economies - - - Performance and Prospects

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