From Centrally-Planned to Market Economies: The Road from CPE to PCPE

Guillermo Calvo and Jacob A. Frenkel

No 3698, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper deals with the early stages of transformation of centrally-planned economies (CBEs) into market economies during which expectations playa key role. It focuses on the transitional phase during which the economy is not any more a CPE but has not yet become a market economy. During this phase the economy is referred to as a 'previously centrally-planned economy" (PCPE). A simple model is developed to analyze the consequences of expected price liberalization. The model highlights the anticipatory character of economic behavior during the early stages of the transformation process. A major focus is given to credit markets. The CPEs undergoing transformation lack depth and breadth of financial markets. The lack of information necessary to assess risk and creditworthiness complicates the conduct of credit polity. The analysis illustrates the benefits of an early development of such markets, and of finding appropriate ways to "clean" the balance sheets of enterprises and banks from bad loans. It demonstrates the cost of a fine-tuning strategy and the benefits from a quick implementation of price reform. The paper also examines alternative means to reduce 'liquidity overhang," and shows that all involve taxation of one form or another. The consequences of privatization are analyzed and the benefits of an early development of an effective tax system highlighted.

Date: 1991-05
Note: ITI IFM
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

Published as Guillermo A. Calvo & Jacob A. Frenkel, 1991. "From Centrally Planned to Market Economy: The Road from CPE to PCPE," Staff Papers - International Monetary Fund, vol 38(2).

Downloads: (external link)
http://www.nber.org/papers/w3698.pdf (application/pdf)

Related works:
Working Paper: From Centrally-Planned to Market Economies: The Road from CPE to PCPE (1991)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:nbr:nberwo:3698

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w3698

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().