Capital accumulation during the transition from plan to market

Author: Dobrinsky, Rumen

Source: Economics of Transition, Volume 15, Number 4, October 2007 , pp. 845-868(24)

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Abstract:

This paper focuses on the process of capital accumulation and the forces that drive it in the countries undergoing the transition from plan to market. The methodological framework for analyzing the determinants of aggregate business investment draws on the neoclassical accelerator model, extending it to reflect some of the specificities of the transition environment. The model is estimated on data for the economies in Central and Eastern Europe (CEE) and the Commonwealth of Independent States (CIS). The results highlight the role of some key drivers of capital accumulation in an economy in transition, in particular, the relatively significant accelerator response to output, the importance of adjustment effects and financing constraints and the relatively minor role of the cost of capital.

Keywords: D24; E22; G31; Capital accumulation; business investment; transition economies; financing constraints

Document Type: Research article

DOI: http://dx.doi.org/10.1111/j.1468-0351.2007.00301.x

Affiliations: 1: United Nations Economic Commission for Europe, Palais des Nations, CH-1211 Geneva, Switzerland., Email: rumen.dobrinsky@unece.org

Publication date: 2007-10-01