Money Cant Buy Me Growth: Making Change Happen in Post-communist Countries?

Abstract

The European Bank for Reconstruction and Development(EBRD) was set up in 1991 with the aim to foster private sector development and to encourage the creation of the market economy in the post-communist countries of Central and Eastern Europe and the former Soviet Union. Between 1994 and 2004, the EBRD has spent over 20 billion euros on loans and equity stakes in private assesses the return on this investment in terms of economic growth in transition economies. The main finding is that Western money does seem to buy us growth in post-communist countries - although money does seem to buy market-oriented reform and democratization. Hence, the EBRD has only an indirect effect (if any) on economic growth duting transition: EBRD investment encourages economic reforms which in turn translate into faster growth.