Transformation process and the J‐curve problem

Notes that most of the reforms in Eastern European countries have been piecemeal and have not constituted a comprehensive programme. Describes what a comprehensive programme consists of, why a J‐curve in output and employment arises and what consequences it has. Discusses the possibilities and limitations of external help to avoid a structural extension of this J‐curve problem. Notes that a comprehensive transformation programme includes institutional innovations as well as monetary disinflation policy, which produces recessionary J‐curve‐like output and employment costs. Also that effects of anticipatory recessions, based on anticipated future expenditures of western countries for rebuilding eastern economies (or for preventing economic decline and political disorder), may arise.