Abstract

It is difficult to think of historical cases when countries were subjected to more dramatic external shocks and had to undergo more fundamental reorientation of their external trade as was the case for the transition economies following the collapse of the Berlin Wall. Simultaneously, they had to face deep internal shocks originating in the demise of central planning. The shocks led to fundamental changes in the system of resource allocation, leading to dramatic changes in the system of ownership, industrial organization, legal and administrative institutions, incentives and in the role of economic policy.