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Trade and Exchange Rate Policies in Formerly Centrally Planned Economies

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Author Info
Richard Pomfret (The University of Adelaide)

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Abstract

This paper examines the international economic policies of the eastern European and Soviet Successes States in the early 1990s which provide one of those wide-open windows of opportunity when powerful vested interests are not lobbying for retention of an existing tariff structure. Moreover, the simultaneous abandonment of central planning by over two dozen countries provided a natural experiment in which a range of differing policies might have been pursued. Policymakers in transition economies have generally ended up pursuing liberal non-discriminatory trade and foreign exchange policies. There are exceptions and the majority may be wrong, but the presumption is that, perhaps after a learning or trial-and-error process, decision makers have found the rules of thumb suggested by economists to be their best guide to international economic policy. This paper notes that integration of transition economies into the global trading system has been surprisingly successful. Almost all the countries in transition from central planning have accepted the WTO rule-based system in principle, even if there are variations in trade policies and performance, and have generally pursued multilateral non-discriminatory trade policies. In particular, the potential danger of regionalism proving more attractive than multilateralism has not eventuated. The revealed behaviour of policymakers suggests that trade liberalisation is a good rule of thumb and regional groupings among transition economies have been insignificant. Despite a proliferation of new currencies, varying exchange rate regimes, and differing degrees of currency convertibility, the general pattern has been to accept convertibility for current account transdactions, and in many cases to extend this to a de jure commitment and to allow substantial capital account convertibility. A general policy conclusion in favour of more open and non-discriminatory trade and exchange policies have passed the test of acceptability by policymakers in over two-dozen countries in this category. Copyright © Blackwell Publishing Ltd 2003.

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Article provided by Blackwell Publishing in its journal The World Economy.

Volume (Year): 26 (2003)
Issue (Month): 4 (04)
Pages: 585-612
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Handle: RePEc:bla:worlde:v:26:y:2003:i:4:p:585-612

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  1. Richard Pomfret, 2005. "Trade Policies in Central Asia after EU Enlargement and before Russian WTO accession: Regionalism and Integration into the world economy," Others 0502003, EconWPA. [Downloadable!]
    Other versions:
  2. Boris Najman & Richard Pomfret & Gael Raballand & Patricia Sourdin, 2005. "How are Oil Revenues redistributed in an Oil Economy? The case of Kazakhstan," Development and Comp Systems 0512012, EconWPA. [Downloadable!]
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