Transition Economies

[ Trace ]

[ MPSG ]

Outline

The end of the Soviet Union caused a severe break-down of the economies in the Caspian region. The massive output fall, wide-ranging political conflict and social unrest determined the policy agenda in the region. Nevertheless, these countries managed to successfully implement so-called 'firstround reforms' to control galloping inflation and stabilize basic macroeconomic indicators.

Given unfavourable initial conditions, the TransCaspian1 countries in Commonwealth of Independent States (CIS) show quite reasonable GDP per capita growth rates. But high remittances and international aid on the one hand and low domestic savings and investment rates on the other, point to a mostly demand-driven growth. This begs the danger of inflation and divergence of productivity- and real GDP-growth putting sustainable development at risk.

The overall objective of the project is thus to trace the sustainability of the economic growth process in selected TransCaspian states belonging to the CIS. The rationale behind the proposed approach is to trace macroeconomic shortcomings in the Caspian countries to political failures. Departing from the central idea of an economic catch-up process to middle-income countries, research activities within TRACE will focus on the economic and political determinants of the transition process. Special emphasis is put on the interdependency of different political systems and macro-economic policies.

On these grounds the main objective of the project, which will be elaborated by partners from Kazakhstan, Georgia, Azerbaijan, Armenia and Germany, is to develop a sound understanding of domestic political pressures shaping the behaviour of policymakers and the consequences for long-run sustainable growth for different political systems in the Caspian region.