International Monetary Fund. E-mail: rvanrooden@imf.org

¹The authors are staff members of the International Monetary Fund. The views expressed are those of the authors and do not necessarily represent the position or official views of the International Monetary Fund. We are grateful for the comments of John Odling-Smee, Mario Blejer, participants at the Fifth Dubrovnik Conference on Transition Economies, and two referees of this journal.

Received 2 August 2002; Revised 20 September 2002; Accepted 23 September 2002.

Abstract

This paper analyses the importance of developing market-enhancing institutions for restoring economic growth in transition economies during 1991–98. The paper's main finding is that the development of an institutional framework has indeed a significant positive impact on growth, but that progress in achieving macroeconomic stabilisation and implementing broad-based economic reforms remain the key determinants of growth in transition economies.