Working Paper: CEPR ID: DP371
Authors: David M. Newbery
Abstract: The two central economic problems facing Hungary are its large foreign debt and its relatively poor rate of growth over the 1980s. The paper examines some of the reform issues facing Hungary, starting with the tax reforms of 1988 and 1989, but concentrating on the importance of creating competitive conditions in product and factor markets as a precondition for success of other reforms. International trade could play a key role, but liberalization is constrained by the contractual nature of trade with other Eastern Bloc countries through the CMEA, and by the large overhang of hard currency debt. Issues of capital market reform and privatization are briefly discussed.
Keywords: Hungary; Reform; Competition; Policy; Privatization
JEL Codes: H21; O24
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Tax reforms initiated in 1988 and 1989 (H29) | Increase in Hungary's economic growth rate (O52) |
| Large foreign debt (F34) | Constraints on economic performance (P47) |
| Reforms (E69) | Enhanced ability to service debt (G32) |
| Competitive conditions in product and factor markets (L11) | Successful economic reform (E69) |
| Restructuring of industries and dismantling of monopolistic practices (L43) | Improving efficiency and economic performance (O49) |