Transitional economies are also called emerging economies that are broadly defined as nations which are in the process of rapid growth and industrialization. Mostly these nations are transforming into an open market economy with emerging characteristics like the growth of the working population. The term transitional economies are used for the countries which are moving from closed economies to open and free market economies which mean the interaction of these economies with the outer world is rising day by day. For example, China, Japan, Korea, Pakistan, India, are known as transitional economies. These economies share these common characteristics below:
- Emerging markets are often in an ongoing process of transition from a closed economy to an open market economy. With hopes of favourable policies, there is also increasing political and monetary policy risk.
- These economies often have younger working populations which are an indicator of strong long-term growth of workers and consuming goods.
- These emerging economies are currently in the early stages of developing policies and building infrastructure. This means there is a growing demand and need for government spending in order to train the people for better output results for the economy.
- Another leading indicator is increasing foreign investment. Emerging open markets usually see strong foreign direct investment, which can be beneficial for overall economic growth.