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economic transition, institution, economic growth, foreign direct investment, E6, O4,

The article deals with the relevance of post-Keynesian theory of conflict inflation for the transition economies. While the conflict inflation theory does not have any explanatory tower for the performance of socialist economies and for their immediate post-socialist behaviour. it becomes relevant in later phases of their transition. The reason lies in the development of labour market institutions and in the establishment of collective bargaining. The inflation rate is determined by the real wage aspiration gap and by the bargaining power of the capital and labour side. The pervasive role of the state in setting target wage guidelines and a weak position of employers' organizations and trade unions as typical features of transitional tripartism lead to a relatively low rate of conflict inflation. However, this type of inflation is not responsive to monetarist anti-inflationary measures, which successfully cured the hyperinflationary tendencies in early transitional stages. Conflicting-claims inflation requires a more delicate approach. based on incomes policy measures and growth incentives.

The paper investigates the relationship between fundamental uncertainty, a recurrent theme in post-Keynesian economic literature, and economic performance in transition economies. Uncertainty in the transitional economic environment is enhanced by factors such as institutional transformation, political and social instability, and legacies of the past. To capture the changes in the levels of transition-specific uncertainty, the authors have designed the uncertainty index, based on a weighted selection of Heritage Foundation and Freedom House data. The correlation between the uncertainty index and growth is strong and clearly negative. Panel data analysis based on a growth model, supplemented by variables to simulate transitional cycle, and performed on a sample of transition economies for the period 1995-2002, confirms that high levels of transition-specific uncertainty had a negative impact on economic growth.uncertainty, economic transition, institutions, economic growth,

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