The political economy of Bulgaria's peculiar post-communist business cycle

Wyzan M (1998). The political economy of Bulgaria's peculiar post-communist business cycle. Comparative Economic Studies 40 (1): 5-42. DOI:10.1057/ces.1998.2.

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Abstract

This paper describes Bulgarian macroeconomic performance from early 1991 through early 1997 and provides insights into the macroeconomics of unsatisfactory performance and the political-economy of poor decision-making. There are two leitmotifs: failure to face structural problems and inherited foreign debt; the factors generating Bulgaria's business cycle were interest rate policy and the IMF's varying standoffishness. Bulgaria's macroeconomic poroblems were unusual in that the flawed policy regime involved interest rate policy, and the collapse of the lev in 1996 and 1997 was not preceded by growing current account imbalances. The political economy of the situation was distinctive because the cycle was driven by monetary policy and because of the large role played by international financial institutions. We find a model by Roberto Perotti of shifting coalitions among three interest groups – rich, poor, and middle class segments – in a poor, inegalitarian society relevant for explaining Bulgarian events.

Revised version of a paper presented in the session, “Political Economy of Reform Failure and Poor Economic Performance,” sponsored by Association for Comparative Economic Studies at the annual meetings of the Allied Social Science Associations in Chicago in January 1998. The author wishes to thank Liliana Botcheva, Jeffrey Miller, and Martin Spechler for their comments, and Rossen Rozenov for providing data, with the usual absolution from responsibility for any errors or omissions.

Item Type: Article
Research Programs: Economic Transition and Integration (ETI)
Bibliographic Reference: Comparative Economic Studies; 40(1):5-42 [1998]
Depositing User: IIASA Import
Date Deposited: 15 Jan 2016 02:09
Last Modified: 22 Sep 2016 14:59
URI: http://pure.iiasa.ac.at/5394

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