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Transition in Russia: It's Happening

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Author Info

  • Daniel Berkowitz
  • David DeJong
  • Steven Husted

Abstract

Working with 110 pairs of time series of state and market commodity prices in Russia, we search for signs of transition in Russia from a command to a market economy. Beginning with inter-city comparisons of state and market prices, we find that differences in the levels of these prices have gradually diminished following the 1992 Big Bang, that market/state price ratios have become increasingly uniform across cities, and that the volatility of innovations to these ratios has decreased dramatically. Further, we find widespread evidence within cities that state and market prices are co-integrated, and that market prices are causally prior to state prices, in the sense of Granger (1969). Finally, we find widespread evidence of co-integration and causality between state and market prices across cities. These findings suggest that, despite obstacles posed by resistant local governments, mafia activity and poor infrastructure, Russia's efforts to implement economic reforms have generated tangible results: the transition to a market economy appears to be well underway.

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Bibliographic Info

Paper provided by William Davidson Institute at the University of Michigan in its series William Davidson Institute Working Papers Series with number 33.

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Length: pages
Date of creation: 01 Feb 1997
Date of revision:
Handle: RePEc:wdi:papers:1997-33

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Keywords: market integration; causality; co-integration;

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References

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  1. White, Halbert, 1980. "A Heteroskedasticity-Consistent Covariance Matrix Estimator and a Direct Test for Heteroskedasticity," Econometrica, Econometric Society, vol. 48(4), pages 817-38, May.
  2. Paula De Masi & Vincent Koen, 1996. "Relative Price Convergence in Russia," IMF Staff Papers, Palgrave Macmillan, vol. 43(1), pages 97-122, March.
  3. DeJong, David N. & Nankervis, John C. & Savin, N. E. & Whiteman, Charles H., 1992. "The power problems of unit root test in time series with autoregressive errors," Journal of Econometrics, Elsevier, vol. 53(1-3), pages 323-343.
  4. Granger, C W J, 1969. "Investigating Causal Relations by Econometric Models and Cross-Spectral Methods," Econometrica, Econometric Society, vol. 37(3), pages 424-38, July.
  5. Polterovich, Victor, 1993. "Rationing, Queues, and Black Markets," Econometrica, Econometric Society, vol. 61(1), pages 1-28, January.
  6. Vincent Koen & Steven Phillips, 1992. "Price Liberalization in Russia: The Early Record," IMF Working Papers 92/92, International Monetary Fund.
  7. Murrell, Peter & Dunn, Karen Turner & Korsun, Georges, 1996. "The Culture of Policy-Making in the Transition from Socialism: Price Policy in Mongolia," Economic Development and Cultural Change, University of Chicago Press, vol. 45(1), pages 175-94, October.
  8. Weitzman, Martin L, 1991. "Price Distortion and Shortage Deformation, or What Happened to the Soap?," American Economic Review, American Economic Association, vol. 81(3), pages 401-14, June.
  9. Granger, C. W. J., 1988. "Some recent development in a concept of causality," Journal of Econometrics, Elsevier, vol. 39(1-2), pages 199-211.
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Cited by:
  1. Freinkman, Lev & Haney, Michael, 1997. "What affects the Russian regional governments'propensity to subsidize?," Policy Research Working Paper Series 1818, The World Bank.

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