Stabilization is both possible and necessary in transition economies. But does stabilization policy work the same way for transition countries stabilizing very high inflation or hyperinflation as it does in market economies? One reason for doubt is that transition economies have far less developed institutional infrastructure, particularly financial systems, than market economies. The lack of such infrastructure has~been hypothesized by vqrious authors to result in different responses to stabilization policies.
This paper examines these questions by studying financial and real sector indicators after stabilization. It compares a group of successfully stabilizing market economies (Argentina, Bolivia, Israel, Mexico and Peru) to a group of successfully stabilizing transition economies (Croatia, Estonia, Latvia, Lithuania, Poland and Slovenia).