Index Number Biases during Price Liberalization
AbstractWhen a formerly centrally planned economy frees prices and allows or compels producers to respond to market signals, conventional measures tend to severely overstate short-run output decline and inflation. The overstatement stems partly from neglect of private sector activity or belated recognition of inflation previously disguised as quality improvements. Even when individual prices and outputs are correctly measured, however, shifts in relative prices consequent to price decontrol create a serious aggregation problem. Moreover, standard indices ignore the deflationary trends in black markets. Theoretically superior indices are devised using a mixture of official and black market prices.
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Bibliographic InfoArticle provided by Palgrave Macmillan in its journal Staff Papers - International Monetary Fund.
Volume (Year): 39 (1992)
Issue (Month): 2 (June)
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Find related papers by JEL classification:
- C43 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Index Numbers and Aggregation
- P24 - Economic Systems - - Socialist Systems and Transition Economies - - - National Income, Product, and Expenditure; Money; Inflation
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- Blangiewicz, Maria & Charemza, Wojciech W., 2001. "East European economic reform: Some simulations on a structural VAR model," Journal of Policy Modeling, Elsevier, vol. 23(2), pages 147-160, February.
- Blangiewicz, Maria & Charemza, Wojciech W., 1999. "East European Economic Reform: Some Simulations on a Structural Vector Autoregressive Model," Journal of Policy Modeling, Elsevier, vol. 21(5), pages 535-557, September.
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