Commitment devices, opportunity windows, and institution building in Central Asia

future costly recessions. Looking at Figure 1 shows that this coincides with the increased reform
efforts in Central Asia after the Russia crisis in 2001 which also spread over the Central Asian
countries and the CEEC.

Beside these market factors, international agreements, such as IMF and World Bank pro-
grammes that specifically target economic improvement may provide a form of commitment as
well. IMF lending schemes such as the Poverty Reduction and Growth Facility (PRGF) provide
credit to emerging markets and transition economies linked to binding structural and social
policy changes (IMF, 2007). Thus, these programmes should have a direct effect on the political
agenda.

Most Central Asian economies, as well as their neighbours in Eastern Europe and the MENA
were part of various development programmes of the World Bank, the IMF, or the OECD. Al-
though these programmes intend to foster market-oriented reforms, empirical evidence suggests
a negative effect of IMF programmes on institutions (cf. Przeworski and Vreeland, 2000; Dreher
and Rupprecht, 2007). It is often argued that the conditionality of these programmes does not
work due to weak constraints and misguided policy recommendations. However, the effect of
these programmes is hard to evaluate empirically. Firstly, there might be long time lags until
policy reforms triggered by e.g. IMF programmes show an effect. Secondly, countries qualify
for these programmes by being in a disastrous economic state and have to agree on becoming
part of an IMF lending scheme or another programme. Thus, a positive effect would be even, if
these programmes could ensure that institutions are not getting worse.

Other types of agreements such as agreements with the EU or other international entities
might work in a similar way. So far, the CEEC have been the most successful reformers among
the former communist countries. A major difference between CEEC and other emerging markets
at the EU periphery is that the countries in Eastern Europe have a reasonable prospect of
entering the EU at some day. There is evidence that the prospect of an EU membership has
become an anchor for domestic economic policy making in many CEEC (Babetskii et al., 2004).
A (prospective) EU membership imposes important constraints on national fiscal and monetary
policy, as well as on other policy areas such as governance, as compliance with the Acquis
Communitaire is a key requirement for entering the EU (European Commission (EC, 2007)).
And thus, the prospect of entering the EU is likely to explain the transition observed in the
CEEC.

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