A Transition from Centrally Planned Economy to Market Economy

The impact of transition from central planning to §market economy is investigated in the context of the §Bulgarian economy and in comparison with other §Central and Eastern European countries. We focus on §two particular aspects: the restructuring and §development of the banking sector and the economic §and non-economic costs of the transition. The §comparison between transitional countries suggests §that the pace of the reforms can be viewed as the §major characteristic of the transition. It is found §that the pace determines the success and slow reform §periods actually consist of a mixture of shorter §periods of rapid reforms and of stalled reforms. The §impact of the transition is measured in two §different ways: on the economy as a whole, and on §its people. A method to measure these costs is §proposed and employed to compute the transition §costs for Bulgaria and some other transition §countries. By this means it is possible to identify §the beginning as well as the end of transition, §in each of the countries. We find that the slow §reforming countries have incurred greater transition §costs, while more rapid reformers have had to pay §less to complete the transition.