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Globalization and economic freedom lead to price stability and growth in former Soviet bloc, according to Dallas Fed's Economic Letter

For immediate release: February 28, 2007

DALLAS—Ex-Soviet bloc countries with freer economies are growing faster than their counterparts with unfree economies, according to the February issue of the Federal Reserve Bank of Dallas’ Economic Letter.

In “After the Fall: Globalizing the Remnants of the Communist Bloc,” senior economic analyst Julia Carter examines the economic conditions in the 27 countries that made up the former Soviet bloc.

“Among the nations once part of the Soviet empire, faster growth and price stability go along with greater economic freedom—a result consistent with other parts of the world,” writes Carter.

Carter analyzes the economic conditions in the former Soviet countries, comparing their ranking on the Heritage Foundation/Wall Street Journal 2007 Index of Economic Freedom with their economic growth from 1993 to 2005. Countries that ranked as moderately or mostly free on the Heritage/WSJ index grew faster than countries that ranked as unfree or repressed.

Some unfree countries, such as Ukraine, Tajikistan and Moldova, actually saw their economies contract.

Carter also scrutinizes the level to which countries in the former Soviet bloc have globalized, noting some progress. The region received $72 billion in foreign direct investment in 2005, or more than 7.9 percent of the world’s total, nearly eclipsing China and India.

To fully embrace globalization and economic freedom, the region must eliminate corruption, strive for broad economic development, and improve their regulatory regimes and property rights, Carter states.

The February 2007 issue of Economic Letter can be found at www.dallasfed.org.

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