Effects of Macroeconomic Factors on Economic Growth Within the Former Soviet Union

Abstract

Since the mid-1990s, the fifteen countries that make up the former-Soviet Union have started to graduate from the economic problems that devastated the region after the dissolution of the USSR. While there is disparity in both the size and makeup of these separate economies, there are still common economic trends that can be observed. The goal of this paper is to examine several macroeconomic variables from 1996-2008, in order to determine which have similar effects on economic growth throughout the region. I also want to determine whether or not these newly post-Communist economies respond to these factors in the matter that the literature suggests should be universal. Although there is much literature extolling the negative effects inflation and debt have on economic growth, I find little evidence of their short-term importance. Foreign direct investment and exports, however, both play a key role in determining economic growth rates. Additionally, I find support for the theory that World Trade Organization member-countries experience higher economic growth, and attempt to explain what about membership explains this trend. WTO countries have engaged in higher levels of overall trade, but have not experienced higher levels of FDI, exports, or institutional confidence than their non-WTO counterparts.