This paper analytically explores and empirically tests a number of hypotheses to
explain the rapid growth in transition economies. The paper finds that growth in
the Commonwealth of Independent States (CIS) has been higher because of the recovery
of lost output, progress in macroeconomic stabilization and market reforms, and favorable
external conditions. Some of these factors are unlikely to continue for a very long
time. The challenge is to improve the investment climate in the non-primary sectors,
which will require broadening the scope of macroeconomic reform into a second generation
of reforms encompassing structural and institutional areas.