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Political Economy of Economic Policy - The Monetary Reconstruction Program (Serbia 1994) as a Case Study

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  • Ljubomir Madžar

Abstract

The paper deals with initiation and destiny of the unique 1994 Program of combating the extreme Serbian hyperinflation. Despite the originality of the Program and decisiveness with which the related steps had been undertaken, the Program lasted not much more than half a year. It turned out to be unsustainable as it is collided with inefficient institutional framework where contracts and rule of law were not honored, and employees, in self-managed firms, decided on their own remuneration. We show that for lasting stabilization a far-reaching institutional reform was needed, and for implementing such reform an equally radical reform of the political system was necessary. However, there was not political will for these reforms, since they would oust the then political and economic elite from the power. Keywords: Hyperinflation, Stabilization, Currency board, Credibility, Institutional deficiencies, Political constraints, Institutionally conditioned unsustainability. JEL: E31, E63, E65.

Suggested Citation

  • Ljubomir Madžar, 2022. "Political Economy of Economic Policy - The Monetary Reconstruction Program (Serbia 1994) as a Case Study," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 69(2), pages 157-172.
    • Handle: RePEc:voj:journl:v:69:y:2022:i:2:p:157-172:id:1665
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    More about this item

    Keywords

    Hyperinflation; Stabilization; Currency board; Credibility; Institutional deficiencies; Political constraints; Institutionally conditioned unsustainability;
    All these keywords.

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E63 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Comparative or Joint Analysis of Fiscal and Monetary Policy; Stabilization; Treasury Policy
    • E65 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Studies of Particular Policy Episodes

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