ABSTRACT
The Slovak Republic began its existence as an independent state in 1993. Before that time, it had participated in developments that characterized the Czech and Slovak Federated Republic (CSFR). These included the liberalization of prices in January 1991; the devaluation of the koruna and the introduction of partial convertibility, and the liberalization of foreign trade; and extensive privatization of both small establishments as well as of large state-owned firms, the latter largely by means of voucher privatization. Macro-economic policies adopted by the Federation called for restrictive monetary policy and an almost-balanced government budget.
The effect and reception of these policies differed between the two republics. Unemployment in Slovakia was greater than in the Czech Republic, as was the output decline, and the Slovak government was unable to balance its budget.
The separation of the two republics was based on a series of treaties and agreements, including the creation of a customs and currency union, the latter not lasting more than two months. The separation had a negative effect on the Slovak economy, both due to a loss of trade and to the need of the Slovak government to finance the government deficit. The level of unemployment did not fall 519after independence, and output has continued to decline gradually. Although the new government had campaigned on a policy of stimulating economic activity by means of expansionary monetary and fiscal policies, the need for support from the International Monetary Fund (IMF) forced the government to try to reduce its budget deficit and to devalue the Slovak koruna.
Although the government was constrained in its macroeconomic policy, it was able to adopt a more interventionist policy toward enterprises than had been possible under the Federation. However, a lack of ministerial direction has hampered these efforts.
