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Macroeconomic equilibrium and reform in a transitional economy


  • Bennett, John
  • Dixon, Huw David


We build a general equilibrium macroeconomic model of a transitional economy to reflect five stylized facts. Among these are that central planning has left a legacy of highly concentrated industry and a residue of price controls and rationing. An `almost Classical' dichotomy obtains in the model: monetary expansion leaves output and unemployment unchanged (despite the existence of unemployment), though leisure time declines. The economy displays a high degree of complementarity between the state-controlled sector and the private sector, however, giving rise to multiplier effects. We analyse the effects of price liberalization and privatization in this framework.
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  • Bennett, John & Dixon, Huw David, 1995. "Macroeconomic equilibrium and reform in a transitional economy," European Economic Review, Elsevier, vol. 39(8), pages 1465-1485, October.
  • Handle: RePEc:eee:eecrev:v:39:y:1995:i:8:p:1465-1485

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    References listed on IDEAS

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    Cited by:

    1. Bennett, John & Dixon, Huw David, 1995. "Macroeconomic equilibrium and reform in a transitional economy," European Economic Review, Elsevier, vol. 39(8), pages 1465-1485, October.
    2. Yin, Xiangkang, 1998. "The Macroeconomic Effects of Waiting Workers in the Chinese Economy," Journal of Comparative Economics, Elsevier, vol. 26(1), pages 150-164, March.
    3. Yener Kandogan, 1999. "Lingering effects of central planning on trade? Evidence from current CIS trade patterns," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 135(3), pages 501-521, September.
    4. John Bennett & Huw Dixon & Helen X.Y. Hu, 2008. "The Effects of Reforming the Chinese Dual-Track Price System," CEDI Discussion Paper Series 08-14, Centre for Economic Development and Institutions(CEDI), Brunel University.
    5. Bennett, John & Dixon, Huw & Hu, Helen X.Y., 2013. "The transition from dual-track pricing to a market system: Winners and losers," Economic Systems, Elsevier, vol. 37(1), pages 30-44.
    6. Fung, Michael K. Y. & Ho, Wai-Ming & Zhu, Lijing, 2000. "Stagflationary effect of government bond financing in the transforming Chinese economy: a general equilibrium analysis," Journal of Development Economics, Elsevier, vol. 61(1), pages 111-135, February.

    More about this item

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • E10 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - General
    • P21 - Economic Systems - - Socialist Systems and Transition Economies - - - Planning, Coordination, and Reform
    • P51 - Economic Systems - - Comparative Economic Systems - - - Comparative Analysis of Economic Systems


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