The Eurasian growth paradox

In the first decade of postcommunist transition, multiple growth regressions showed that the more radical and comprehensive the market economic reform, the earlier a country returned to economic growth and the more vigorous its growth-and Central Europe took the lead. Since 2000, however, annual growth in the Commonwealth of Independent States (CIS) countries has been more than 4 percentage points higher than in the Central European countries. A regression analysis for 20 postcommunist countries shows, with strong significance, that a reduction of public expenditures has most effectively stimulated economic growth. As expected, oil exports are also positive and significant. The distance from the European Union (EU) is also positive and significant. that is, the further a country is from the EU, the higher its economic growth. The effect of corruption is negative for growth but only marginally significant. Neither the laggard effect nor investment reveals any significant effect. The conclusion is that at least among postcommunist countries, more emphasis should be given to the need to reduce public expenditures to boost economic growth.