Central Bank Independence in Transition Economies

3.5. Inflation Performance 

Although the substantial economic changes took place in all fourteen countries, 

there are considerable differences in the progress of reforms. The degree of 

macroeconomic stabilisation, which is a precondition for transformation, is reflected in 

the inflation performance. The annual changes in consumer prices (end-year) are 

presented in Figures 2 and 3. Countries are divided into two broad groups: with low 

(or moderate) inflationary history (Croatia, Czech Republic, Hungary, Poland, Slovak 

Republic and Slovenia) and high inflationary history (Belarus, Bulgaria, Georgia, 

Kyrgystan, Romania, Russia and Ukraine).  

Countries in the first group (Fig. 2), which managed to keep inflation under 

control from the beginning of the tranformation, may be further divided into two 

subgroups. In Slovenia, Czech and Slovak Republics the inflation rate was stable 

(constant or moderately decreasing) and fell in the range of 5-15% at the end of 1996. 

Croatia, also included in this subgroup, experienced the high initial inflation and very 

fast and sustainable stabilisation. In Hungary, Latvia and Poland the price growth was 

higher (15-25% at the end of 1996) and less stable, although decreasing in Latvia and 

Poland.  

The inflationary performance in the second group (Fig. 3 — Belarus, Bulgaria, 

Kyrgystan, Romania, Russia, Ukraine) reflects a history of their several stabilisation 

attempts. The most recent stabilisation in Ukraine and Russia seems to successful so 

far and initial near-hyperinflations have been significantly reduced. Reduction was 

even more dramatic in Georgia. Disinflation in Belarus seems to be also significant, 

although in assessing inflationary performance one must be taken into account the 

widespread price control and doubtful statistics. Kyrgystan, after the initial drop, has a 

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