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INTRODUCTION
Transition countries in the European and Eurasian region all experienced a significant decline in output throughout the 1990s.1 While the extent of the decline is sometimes disputed on the basis of incomparability between Soviet period and market regime measures of gross domestic product (GDP), there is no doubt all countries went through what Kornai labelled a 'transitional recession'. It is also agreed that the recovery came relatively early for Central Europe and the Baltics, which hit bottom in the period 1992-1994. Others, and in particular many in the Commonwealth of Independent States (CIS), witnessed a continued decline through much of the 1990s, but starting about 2000, the latter not only finally began to recover, they experienced a surge of growth with annual GDP growth rates between 6% and 10% and sometimes more.
In the second half of the 1990s, many econometric studies of growth in transition were undertaken to explain both the sharp decline and the recovery where it had begun. Traditional factor inputs were generally found to be unimportant, and a broad consensus emerged that for better performance stabilisation was a sine qua non , liberalising reforms generally promote growth as does institutional development and that unfavourable initial conditions retard it at least in early years of transition.2 These explanations fit well the broad facts of Central Europe and to a lesser extent the Baltics, experiencing less decline and earlier recovery of GDP. One implication of this literature was that CIS did not face good prospects for growth because CIS countries by the end of the decade still lagged far behind Central Europe and the Baltics on all reforms, except perhaps stabilisation. It was therefore somewhat of a puzzle why they experienced a strong surge in GDP growth from 2000, with rates far higher than Central Europe had then or at the time of their recovery. The most popular alternative explanation was the oil price boom. The first objective of this paper is to show that this alternative explanation was far from the whole story: the oil boom contributed to high growth, but the underlying reason for recovery at this time remains the same as for Central Europe and the Baltics: they reached a minimum sufficient threshold of stabilisation, liberalisation...