Public Finance, Governance, And Growth In Transition Economies: Empirical Evidence From 1992-2004

This paper revisits the early empirical literature on economic growth in transition economies, with particular focus on fiscal policy variables: fiscal balance and the size of government. The baseline model utilizes a parsimonious specification, drawn from Fischer and Sahay (2000), of economic growth as a function of initial conditions, stabilization, market liberalization, and structural reform. The paper expands the data used in previous analyses by up to 10 years and finds unambiguous evidence that fiscal balance matters for growth, while confirming other previous findings on the correlates of economic growth in transition economies.