IDEAS home Printed from https://ideas.repec.org/a/aea/jecper/v5y1991i4p107-22.html
   My bibliography  Save this article

Financial Control in the Transition from Classical Socialism to a Market Economy

Author

Listed:
  • Ronald I. McKinnon

Abstract

The transition from socialism to capitalism poses severe problems of financial management that have yet to be resolved in principle, let alone in practice. One unfortunate consequence is continual financial turmoil as socialist economies of the Soviet Union and Eastern Europe attempt reform. Inflation, either open or repressed, first accompanies and then undermines attempts to decentralize decision-making. But why should the transition from central planning to a market economy be inflationary? Understanding the system of financial control in the preexisting regime of "classical" socialism is the key to understanding what might go wrong in the transition. I discuss how in a more deliberate transition, domestic tax and monetary arrangements might be managed to keep the average price level stable as the market prices of individual goods and services become free to fluctuate, and suggest complementary policies governing tariffs and foreign exchange convertability in the move toward free foreign trade.

Suggested Citation

  • Ronald I. McKinnon, 1991. "Financial Control in the Transition from Classical Socialism to a Market Economy," Journal of Economic Perspectives, American Economic Association, vol. 5(4), pages 107-122, Fall.
  • Handle: RePEc:aea:jecper:v:5:y:1991:i:4:p:107-22
    Note: DOI: 10.1257/jep.5.4.107
    as

    Download full text from publisher

    File URL: http://www.aeaweb.org/articles.php?doi=10.1257/jep.5.4.107
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. McKinnon, Ronald I., 1979. "Money in International Exchange: The Convertible Currency System," OUP Catalogue, Oxford University Press, number 9780195024098.
    2. János Kornai, 1986. "Contradictions and Dilemmas: Studies on the Socialist Economy and Society," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262111071.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Menzie Chinn & Jeffrey A. Frankel, 2007. "Will the Euro Eventually Surpass the Dollar as Leading International Reserve Currency?," NBER Chapters, in: G7 Current Account Imbalances: Sustainability and Adjustment, pages 283-338, National Bureau of Economic Research, Inc.
    2. Leland B. Yeager, 2000. "Exchange Rates between What Sorts of Currencies?," Cato Journal, Cato Journal, Cato Institute, vol. 20(1), Spring/Su.
    3. Reiss, Daniel Gersten, 2014. "Invoice Currency in Brazil," MPRA Paper 59412, University Library of Munich, Germany.
    4. Donnenfeld, Shabtai & Zilcha, Itzhak, 1991. "Pricing of Exports and Exchange Rate Uncertainty," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 32(4), pages 1009-1022, November.
    5. Rajas Parchure, 2009. "A Model of Market Clearing Exchange Rates," Working Papers id:2153, eSocialSciences.
    6. Maurice Obstfeld & Alan M. Taylor, 1998. "The Great Depression as a Watershed: International Capital Mobility over the Long Run," NBER Chapters, in: The Defining Moment: The Great Depression and the American Economy in the Twentieth Century, pages 353-402, National Bureau of Economic Research, Inc.
    7. Mileva, Elitza & Siegfried, Nikolaus, 2012. "Oil market structure, network effects and the choice of currency for oil invoicing," Energy Policy, Elsevier, vol. 44(C), pages 385-394.
    8. Laura Márquez-Ramos & Inmaculada Martínez-Zarzoso & Celestino Suárez-Burguet, 2011. "Determinants of Deep Integration: Examining Socio-political Factors," Open Economies Review, Springer, vol. 22(3), pages 479-500, July.
    9. Ronald McKinnon, 2010. "Rehabilitating the unloved dollar standard," Asian-Pacific Economic Literature, Asia Pacific School of Economics and Government, The Australian National University, vol. 24(2), pages 1-18, November.
    10. Radostin Neykov & Caroline Robert, 2021. "The Role of the Euro in the Eastern Partnership Countries," European Economy - Discussion Papers 2015 - 138, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
    11. Wyplosz, Charles, 2001. "Exchange Rate Regimes: Some Lessons from Postwar Europe," CEPR Discussion Papers 2723, C.E.P.R. Discussion Papers.
    12. Philip Turner, 2012. "Macroprudential policies in EMEs: theory and practice," BIS Papers chapters, in: Bank for International Settlements (ed.), Financial sector regulation for growth, equity and stability, volume 62, pages 125-139, Bank for International Settlements.
    13. Ligthart, Jenny E. & Werner, Sebastian E.V., 2012. "Has the euro affected the choice of invoicing currency?," Journal of International Money and Finance, Elsevier, vol. 31(6), pages 1551-1573.
    14. Menzie Chinn & Jeffrey Frankel, 2008. "Why the Euro Will Rival the Dollar," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 55(3), pages 255-278, September.
    15. Lisa Keister, 2009. "Organizational research on market transition: A sociological approach," Asia Pacific Journal of Management, Springer, vol. 26(4), pages 719-742, December.
    16. Ronald McKinnon, 1990. "The exchange rate and the trade balance," Open Economies Review, Springer, vol. 1(1), pages 17-37, February.
    17. repec:got:cegedp:112 is not listed on IDEAS
    18. Pekka Ahtiala, 1981. "When does the J-Curve Have a J-Shape? A Reconsideration," Discussion Papers 473, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
    19. Shin-ichi Fukuda & Masanori Ono, 2004. "The Choice of Invoice Currency under Uncertainty: Theory and Evidence from Korea (Subsequently published in "Journal of the Korean Economy" Vol.6 No.2 Fall 2005. )," CARF F-Series CARF-F-001, Center for Advanced Research in Finance, Faculty of Economics, The University of Tokyo.
    20. Guo, Jing & Wang, Yanan & Yang, Wei, 2021. "China's anti-corruption shock and resource reallocation in the energy industry," Energy Economics, Elsevier, vol. 96(C).
    21. Pierre-Olivier Gourinchas & Hélène Rey & Maxime Sauzet, 2019. "The International Monetary and Financial System," Annual Review of Economics, Annual Reviews, vol. 11(1), pages 859-893, August.

    More about this item

    JEL classification:

    • P21 - Economic Systems - - Socialist Systems and Transition Economies - - - Planning, Coordination, and Reform
    • P34 - Economic Systems - - Socialist Institutions and Their Transitions - - - Finance

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:aea:jecper:v:5:y:1991:i:4:p:107-22. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: . General contact details of provider: https://edirc.repec.org/data/aeaaaea.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Michael P. Albert (email available below). General contact details of provider: https://edirc.repec.org/data/aeaaaea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.