ABSTRACT
Financial instability has emerged as perhaps the most burdensome problem associated with the transition from state socialism to market-oriented economies in Eastern Europe and the former U.S.S.R. Because monetary and fiscal policies played only passive roles in the traditional Soviet-type economic systems, policymakers in the Soviet successor states have had a particularly difficult experience in designing and implementing prudent monetary and fiscal policies. The three Baltic states represent a special example because they were afforded a significant measure of economic autonomy from the USSR some two years before the formal dissolution of the Soviet Union. Because they are further ahead in their fiscal policy reforms, they can serve as useful case studies for the other Soviet successor states. This paper examines Baltic experience with 219fiscal policy in the early stages of transition, and focuses on issues and problems that are likely to arise throughout the former Soviet region.
