The Impact of the Economic Transition on Domestic Output in the Former Czechoslovakia: Foreign Trade Indicators and Government Policy Available to Purchase

The recent process of the transition to market systems in the Central European economies has had profound effects on both trade and domestic output. Two of the by‐products of the transition, the fall in the volume of intra‐COMECON trade as well as the deliberate tightening of the fiscal stance in the economies of these countries, have contributed significantly to a fall in the level of manufacturing output,particularly in the case of the former Czechoslovakia. Examines the implications of the behaviour of the trade account and of government fiscal policy for the domestic manufacturing sector in former Czechoslovakia between 1990 and 1992. Industrial restructuring was extreme, leading to increased reliance on imports: however, the contraction in the manufacturing sector may have kept wages pressures and inflation low, as well as attracting foreign investment, leading to a relatively successful transition for the Czech Republic.