Savings and Stabilization Policy in a Pre-Post-Socialist Economy

John Bennett () and Maxim Boycko

Journal of Money, Credit and Banking, 1995, vol. 27, issue 3, 907-19

Abstract: A simple macroeconomic model of a reforming socialist economy is presented with queuing in period one but market-clearing prices in period two. If queues grow longer, each household chooses to save more, not because it is 'forced' but to economize on queuing effort. For the benchmark case (perfect foresight), immediate price liberalization is the government's optimal policy. It raises welfare (the more so, the greater is the monetary overhang) and in terms of full prices it is deflationary, at least eventually. The model then is modified to allow for indexation, a resale market, adaptive expectations, and limited credibility. Copyright 1995 by Ohio State University Press.

Date: 1995
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Persistent link: https://EconPapers.repec.org/RePEc:mcb:jmoncb:v:27:y:1995:i:3:p:907-19

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