The terms-of-trade effects from the elimination of state trading in Soviet-Hungarian trade
Economists have debated whether the Soviet Union subsidized trade with its Eastern European partners in the Council of Mutual Economic Assistance (CMEA). Effective January 1, 1991, former CMEA members implemented their"switchover"decision to convert to world market prices denominated in convertible currency. The switchover dramatically reduced the role of"state trading"by permitting direct enterprise to enterprise transactions denominated and settled in convertible currency. The authors made an intensive study of the trading relationship between Hungary and the Soviet Union as a case study on the terms-of-trade issue. A detailed empirical investigation of prices in Soviet-Hungarian trade before and after the switchover provides some indication of the terms-of-trade loss that Hungary is likely to suffer as a result of the switchover of its trading relationship with the Soviet Union. Contrary to conventional wisdom, the authors find that the majority of Hungarian firms exporting to the Soviet Union have been disfavored by the combination of the payments mechanism, exchange rate, tax and subsidy policies. The experience of early 1991 suggests a significant decline is likely to occur in Soviet imports from Hungary during the remainder of the year. A variety of problems account for the decline, many of them specific to internal conditions in the Soviet Union.
(This abstract was borrowed from another version of this item.)
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Brada, Josef C., 1985. "Soviet subsidization of Eastern Europe: The primacy of economics over politics?," Journal of Comparative Economics, Elsevier, vol. 9(1), pages 80-92, March.
- Brada, Josef C., 1988. "Interpreting the Soviet subsididzation of Eastern Europe," International Organization, Cambridge University Press, vol. 42(04), pages 639-658, September.