[Publisher:] Institut für Weltwirtschaft (IfW) [Place:] Kiel [Year:] 1993
Kiel Working Paper No. 552
Opposing recommendations with respect to key sequencing issues characterize the controversy between the advocates of the orthodox (technocratic) approach and the recently popularized political economy approach. It is suggested that the concept of credibility provides in many cases a fruitful link between both categories of proposals. Historical lessons as well as the recent experience of developing countries and economies in transition support this view and help determine the proper reform sequence. Stressing the role of initial conditions, different sequencing tactics are recommended for developing countries and postsocialist economies. In particular, the optimal order of domestic financial market reform and privatization differs for both groups of countries.