Fiscal Policy During the Demise of Central Planning: The Transition to a Market Economy

Andrew Feltenstein ()

No 1990/092, IMF Working Papers from International Monetary Fund

Abstract: This paper constructs an intertemporal general equilibrium model designed to examine an economy in transition from central planning to being market oriented. A numerical algorithm is developed to obtain a solution for the model. Simulations using stylized country-specific data examine the effects of price controls during the transition period, as well as of imposing taxes on returns to investment, and on interest earned on private savings. The paper concludes that, under certain circumstances, the taxation of investment as well as of private savings may have positive effects upon consumer welfare, if price distortions are sufficiently severe.

Keywords: WP; price level; capital stock; decreasing returns to scale; excess supply; consumer demand; firm g; maximization problem; output price; choice variable; Price controls; Consumption; Stocks (search for similar items in EconPapers)
Pages: 32
Date: 1990-10-01
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Persistent link: https://EconPapers.repec.org/RePEc:imf:imfwpa:1990/092

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