Transition economies experience transformation of their economic system. Following the disintegration of the Soviet Union, a number of former socialist countries underwent transitions from central planning to a market economy. More generally, many rapidly growing economies undergo no less profound transformations of their economic systems.

Contrary to common misconception, the transition process cannot be simply reduced to eliminating state intervention and liberalizing the economy. Economies under transition exhibit a unique set of policy challenges. Unlike developed market...

How should a state-led developing country manage the transition to a market-driven economy? What are the prerequisite financial market reforms? How can local institutions facilitate or hinder the process? Combining economic theory, international evidence and an in-depth study of the case of Turkey, this book provides informed answers to these challenging questions. Additionally, it provides a framework for explaining divergence from desired outcomes.

The book begins by tracing the roots of Turkey's traditionally unstable economic performance. A pattern emerges of weak institutions...