TRANSFORMATIONAL RECESSION - THE MAIN CAUSES

All the post-socialist countries are in deep recession. This study discusses the common features of these recessions, using the Hungarian economy as an example. The author starts by considering the following general reasons for the phenomenon: (1) the shift from a sellers' to a buyers' market, (2) the transformation of the real structure of the economy, (3) the disturbances in the coordination mechanisms, (4) the macroeconomic consequences of the hardening of financial discipline, and (5) the backwardness of the financial system. Two components of macro-demand, investment and exports, are then examined. The most important factor here is the dwindling propensity to invest. Finally, a summary of the conclusions to be drawn from the analysis is given. There are good reasons for placing the tasks of emerging from the recession at the top of the list of economic-policy priorities, but it is important to do so without permitting an acceleration of inflation or a resumed increase in indebtedness. (C) 1994 Academic Press, Inc.