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Savings and Stabilization Policy in a Pre-Post-Socialist Economy

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  • Bennett, John
  • Boycko, Maxim

Abstract

A simple macroeconomic model of a reforming socialist economy is presented with queuing in period one but market-clearing prices in period two. If queues grow longer, each household chooses to save more, not because it is 'forced' but to economize on queuing effort. For the benchmark case (perfect foresight), immediate price liberalization is the government's optimal policy. It raises welfare (the more so, the greater is the monetary overhang) and in terms of full prices it is deflationary, at least eventually. The model then is modified to allow for indexation, a resale market, adaptive expectations, and limited credibility. Copyright 1995 by Ohio State University Press.

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Bibliographic Info

Article provided by Blackwell Publishing in its journal Journal of Money, Credit and Banking.

Volume (Year): 27 (1995)
Issue (Month): 3 (August)
Pages: 907-19

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Handle: RePEc:mcb:jmoncb:v:27:y:1995:i:3:p:907-19

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Web page: http://www.blackwellpublishing.com/journal.asp?ref=0022-2879

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Cited by:
  1. Erwin Nijsse & Elmer Sterken,, 1996. "Shortages, interest rates, and money demand in Poland, 1969-1995," Working Papers 25, Centre for Economic Research, University of Groningen and University of Twente.
  2. Cevdet Denizer & Holger C. Wolf, 2000. "The Saving Collapse during the Transition in Eastern Europe," World Bank Economic Review, World Bank Group, vol. 14(3), pages 445-455, September.
  3. Filippov, Mikhail G, 2002. " Russian Voting and the Initial Economic Shock of Hyperinflation," Public Choice, Springer, vol. 111(1-2), pages 73-104, March.

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