ABSTRACT
External transformation in post-Communist economies involves replacing external economic institutions and policies of Soviet-type socialism with market-friendly institutions and economically rational policies. This chapter describes the progress recorded by the post-Communist economies in the several areas. The international prevalence of quantitative restrictions on trade in agricultural products and many services has meant that the “tariffication” of quantitative import restrictions in the post-Communist economies has generally been confined to manufacturing. The post-Communist experience would seem to indicate that, on balance, it is better to err on the side of over-shooting in crafting the initial devaluation. While the post-Communist countries that have made the most progress in external transformation have done so in different ways, a number of common lessons stand out. By contrast, none of the post-Communist countries that failed to bring inflation rates down to Central European and Baltic levels were able to achieve a critical mass in external transformation.
