Ten years of the Czech transition

Transition from a centrally planned to a market economy has three main aspe cts: Underdeveloped market institutions; protection of property rights and limited access to capital; and consistency of macroeconomic policies. In th e Czech case, incomplete reform of the financial intermediation sector was a major problem in the institutional area. The authors argue, however, that the poor results of the Czech Republic compared to Hungary and Poland in t he second half of the 1990s were also due to inconsistent macroeconomic pol icies in the first half of the decade. They also use the message of the Cea se theorem to argue that since the government decided to transfer property rights first to non-strategic owners (using voucher privatization or LBOs), it should have paid due attention to the institutional framework so as to minimize transaction costs during the process of ownership concentration an d restructuralization. At present, fiscal or monetary policies cannot boost the country's performance; policymakers must first attempt to remove the i nstitutional bottlenecks that have accumulated in the economy.