Visegrad twins' diverging path to relative prosperity - Comparing the transition experience of the Czech Republic and Hungary

The author highlights the striking difference between the economic transiti on of the Czech Republic and Hungary. These two countries, roughly of the s ame size and same level of development, have traveled on markedly diverging paths toward relative prosperity. After the velvet revolution of 1989, the Czech Republic began to introduce a comprehensive and consistent package o f macroeconomic stabilization coupled with voucher privatization. Hungary - not having experienced a revolution, rather a change of the ruling elite - was not ready to make substantial macroeconomic adjustment, but did implem ent a supply-side shock therapy toward corporate restructuring. The strateg y of the. Czech government was widely regarded as successful, while the Hun garian one was considered as flamed. The situation had changed by the mid-1 990s, however, when Hungary was forced to undertake comprehensive macro-fin ancial stabilization, which, in turn, has paved the way for high-level, sus tainable, and export-led growth since. The Czech Republic paid its Dries fo r postponing corporate restructuring, but there have been important reforms since 1997 directed at accelerating modernization in both the real and the financial sectors. The pattern of macro versus micro adjustment was, there fore, quite the opposite in the two countries.