EXTERNAL FINANCE IN TRANSITION ECONOMIES: CGE MODELS APPLIED TO POLAND AND HUNGARY

The transition economies of Eastern Europe and the former Soviet Union have implemented at the eve of the transition public measures to promote economic growth and income protection. The success of the policies is very much dependent on the availability of external finance. By calibrating for a country like Poland CGE models for 1987 and 1990 and simulating such measures it is possible to explore likely changes over these years and the effects of these measures on the sectoral and total levels of production, prices, as well as factor remuneration and use. The analysis is complemented with applications for Hungary in 1988 and 1990. The results show commonalties but also differences between the two countries in their dependence on foreign financial resources necessary for the transition.