ABSTRACT
The opening of the borders in the post-socialist economies initiated by the perestroika reforms advanced an entirely new set of nuanced concerns of a developing open economy upon the policy makers in the CIS and across the world. These open economy issues came in addition to the already unraveling domestic output collapse, fiscal adjustment problems, and social problems. Much of the early research on the CIS economies focused on specific issues of market transition and growth (e.g. see Pirttila, 2001 for some critique). Today, the time passed since the beginning of the transition process warrants applicability of a more complex approach. This chapter addresses aspects of interrelation of fiscal policy and external trade positions in the newly independent economies, specifically the issue of “twin deficits.” The concept has become a powerful tool, reinforcing opposition to government interventions in the economy. This discussion is a contribution to literature on fiscal policy, balance of payments, and economic development in transition.
