The optimal speed of transition: a general equilibrium analysis

Micael Castanheira and Gérard Roland

ULB Institutional Repository from ULB -- Universite Libre de Bruxelles

Abstract: We present a benchmark model for the optimal speed of transition from a state-owned to a private market economy, based on the consumption-savings decision in a closed economy. We abstract from frictions to focus on the macroeconomic conditions for accumulation of private capital and closure or restructuring of state-owned enterprises. It is shown that hard budget constraints compensate for too slow speed of enterprise closure but that an excess speed of closure may slow down transition because of output contraction effects. This will especially be the case if such a deviation occurs at early stages of transition.

Date: 2000-02
Note: FLWIN
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Published in: International Economic Review (2000) v.41 n° 1,p.219-240

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Related works:
Journal Article: The Optimal Speed of Transition: A General Equilibrium Analysis (2000)
Working Paper: The Optimal Speed of Transition: A General Equilibrium Analysis (1996)
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