Macroeconomic Stabilization and Performance I: The Period prior to the Kosovo War

Macroeconomic stabilization has been a vital part of the transition process since it constituted a key precondition for the objective of raising efficiency and promoting growth. In Chapter 2 we pointed out that the rise in inflation and the decline in output constituted the two major stylized facts of transition which were particularly profound in the case of the economies of SEE. Furthermore, we indicated that the slow recovery as well as the output reversals that some of the South East European economies experienced were closely connected to ineffective disinflation which was manifested through corresponding inflation reversals. This, except for cases of civil strife and war, constituted significant evidence for the strong linkage between consistent macroeconomic policies and sustainable growth.