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The Effect of Incomes Policies on Inflation in Bulgaria and Poland

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  • Tihomir Enev
  • Kenneth Koford
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    Abstract

    Transition countries, and many other countries with incomplete markets, have faced long periods with both high inflation and unemployment. Policies to reduce inflation without high unemployment include incomes policies, which were widely employed in transition countries. This paper studies the effects of incomes policies on inflation in Bulgaria and Poland in 1990-1993. The actual policies, which were complex and changing, are examined. The policies do not appear well-designed in a technical sense to reduce inflation. A time-series analysis is made which includes standard determinants of inflation including past inflation, wage increases, exchange rate changes, and monetary changes, plus a dummy for incomes policies. The regressions are fairly successful in fitting standard factors that should influence inflation, particularly the exchange rate and unemployment in Bulgaria and wages and unemployment in Poland. They find a fairly substantial inflation-reducing effect from the Bulgarian policy but no significant results from the Polish policy. Copyright Kluwer Academic Publishers 2000

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    File URL: http://hdl.handle.net/10.1023/A:1003886617116
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    Bibliographic Info

    Article provided by Springer in its journal Economics of Planning.

    Volume (Year): 33 (2000)
    Issue (Month): 3 (October)
    Pages: 141-169

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    Handle: RePEc:kap:ecopln:v:33:y:2000:i:3:p:141-169

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    Web page: http://www.springerlink.com/link.asp?id=113294

    Related research

    Keywords: incomes policies; transition; Bulgaria; Poland;

    References

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    1. Welfe, Aleksander, 1996. " The Price-Wage Inflationary Spiral in Poland," Economic Change and Restructuring, Springer, vol. 29(1), pages 33-50.
    2. Brian Pinto & Marek Belka & Stefan Krajewski, 1993. "Transforming State Enterprises in Poland: Evidence on Adjustment by Manufacturing Firms," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 24(1), pages 213-270.
    3. Peter Zadrozny, 1997. "An Econometric Analysis of Polish Inflation Dynamics with Learning about Rational Expectations," Economic Change and Restructuring, Springer, vol. 30(2), pages 221-238, May.
    4. Coricelli, Fabrizio & Lane, Timothy D, 1993. "Wage Controls during the Transition from Central Planning to a Market Economy," World Bank Research Observer, World Bank Group, vol. 8(2), pages 195-210, July.
    5. Robert J. Gordon, 1997. "The Time-Varying NAIRU and Its Implications for Economic Policy," Journal of Economic Perspectives, American Economic Association, vol. 11(1), pages 11-32, Winter.
    6. Kenneth J. Koford & Jeffrey B. Miller & David C. Colander, 1993. "Application of Market Anti-inflation Plans in the Transition to a Market Economy," Eastern Economic Journal, Eastern Economic Association, vol. 19(3), pages 379-393, Summer.
    7. Roberto Golinelli & Renzo Orsi, 1996. "Exchange rate Inflation and Unemployment in East European Economies: the Case of Poland and Hungary," Working Papers 265, Dipartimento Scienze Economiche, Universita' di Bologna.
    8. Jacek Osiewalski & Aleksander Welfe, . "The Price-Wage Mechanism in Poland: An Endogenous Switching Model," Ace Project Memoranda 96/2, Department of Economics, University of Leicester.
    9. Seidman, Laurence S, 1979. "The Role of a Tax-Based Incomes Policy," American Economic Review, American Economic Association, vol. 69(2), pages 202-06, May.
    10. Commander, Simon & Coricelli, Fabrizio, 1992. "Price-Wage Dynamics and Inflation in Socialist Economies: Empirical Models for Hungary and Poland," World Bank Economic Review, World Bank Group, vol. 6(1), pages 33-53, January.
    11. Derek C Jones & Mieke Meurs, 1991. "Worker Participation and Worker Self-Management in Bulgaria," Comparative Economic Studies, Palgrave Macmillan, vol. 33(4), pages 47-82, December.
    12. Sachs, Jeffrey D, 1992. " The Economic Transformation of Eastern Europe: The Case of Poland," Economic Change and Restructuring, Springer, vol. 25(1), pages 5-19.
    13. Zadrozny, Peter A, 1997. " An Econometric Analysis of Polish Inflation Dynamics with Learning about Rational Expectations," Economic Change and Restructuring, Springer, vol. 30(2-3), pages 221-38.
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