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Structure, strain and macroeconomic dynamic in Romania
Daianu, Daniel |
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| After almost 10 years of post-Communist transition in Romania, which had significantly worse initial conditions than those in the leading reform countries, much of the initial euphoria and illusions have gone, with people realising that this historical endeavour is a complex affair. This paper discusses the macroeconomic dynamic in Romania over the last decade and links it to two major issues, the legacy of misallocation of resources and institutional fragility and claims that the lack of institutions and of organised markets hinders a smooth reallocation of resources resulting in a negative effect at both the micro and macro economic levels. The outcome is that Romania has not yet been able to find a clear way forward to a functioning market economy. This paper makes an analysis of the economic developments during 1990 to 1999 which saw resurgent inflation, macro-disequilibria and bank failures emerge as the inevitable outcomes of insufficient restructuring and fragile institutions. It suggests that without large inflows of foreign direct investment and the creation of appropriate institutions, the economy is unlikely to escape from the grip of entrenched structures and that the slow pace of restructuring has put intense strain on the system leading to the path of dependency. |
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