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The Effect of Incomes Policies on Inflation in Bulgaria and Poland

  • Tihomir Enev
  • Kenneth Koford
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    Transition countries, and many other countries with incomplete markets, have faced long periods with both high inflation and unemployment. Policies to reduce inflation without high unemployment include incomes policies, which were widely employed in transition countries. This paper studies the effects of incomes policies on inflation in Bulgaria and Poland in 1990-1993. The actual policies, which were complex and changing, are examined. The policies do not appear well-designed in a technical sense to reduce inflation. A time-series analysis is made which includes standard determinants of inflation including past inflation, wage increases, exchange rate changes, and monetary changes, plus a dummy for incomes policies. The regressions are fairly successful in fitting standard factors that should influence inflation, particularly the exchange rate and unemployment in Bulgaria and wages and unemployment in Poland. They find a fairly substantial inflation-reducing effect from the Bulgarian policy but no significant results from the Polish policy. Copyright Kluwer Academic Publishers 2000

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    File URL: http://hdl.handle.net/10.1023/A:1003886617116
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    Article provided by Springer in its journal Economics of Planning.

    Volume (Year): 33 (2000)
    Issue (Month): 3 (October)
    Pages: 141-169

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    Handle: RePEc:kap:ecopln:v:33:y:2000:i:3:p:141-169
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    1. Richard B. Freeman, 1994. "What Direction for Labor Market Institutions in Eastern and Central Europe?," NBER Chapters, in: The Transition in Eastern Europe, Volume 2: Restructuring, pages 1-36 National Bureau of Economic Research, Inc.
    2. Osiewalski, Jacek & Welfe, Aleksander, 1997. " The Price-Wage Mechanism in Poland: An Endogenous Switching Model," Economic Change and Restructuring, Springer, vol. 30(2-3), pages 205-20.
    3. Commander, Simon & Coricelli, Fabrizio, 1992. "Price-Wage Dynamics and Inflation in Socialist Economies: Empirical Models for Hungary and Poland," World Bank Economic Review, World Bank Group, vol. 6(1), pages 33-53, January.
    4. Zadrozny, Peter A, 1997. " An Econometric Analysis of Polish Inflation Dynamics with Learning about Rational Expectations," Economic Change and Restructuring, Springer, vol. 30(2-3), pages 221-38.
    5. Coricelli, Fabrizio & Lane, Timothy D, 1993. "Wage Controls during the Transition from Central Planning to a Market Economy," World Bank Research Observer, World Bank Group, vol. 8(2), pages 195-210, July.
    6. Sachs, Jeffrey D, 1992. " The Economic Transformation of Eastern Europe: The Case of Poland," Economic Change and Restructuring, Springer, vol. 25(1), pages 5-19.
    7. Roberto Golinelli & Renzo Orsi, 1996. "Exchange rate Inflation and Unemployment in East European Economies: the Case of Poland and Hungary," Working Papers 265, Dipartimento Scienze Economiche, Universita' di Bologna.
    8. Gordon, Robert J, 1996. "The Time-varying NAIRU and its Implications for Economic Policy," CEPR Discussion Papers 1492, C.E.P.R. Discussion Papers.
    9. Seidman, Laurence S, 1979. "The Role of a Tax-Based Incomes Policy," American Economic Review, American Economic Association, vol. 69(2), pages 202-06, May.
    10. Derek C Jones & Mieke Meurs, 1991. "Worker Participation and Worker Self-Management in Bulgaria," Comparative Economic Studies, Palgrave Macmillan, vol. 33(4), pages 47-82, December.
    11. Zeljko Bogetic & Louise Fox, 1993. "Incomes Policy During Stabilization: A Review and Lessons from Bulgaria and Romania," Comparative Economic Studies, Palgrave Macmillan, vol. 35(1), pages 39-57, April.
    12. Franz, Wolfgang & Gordon, Robert J, 1993. "German and American Wage and Price Dynamics: Differences and Common Themes," CEPR Discussion Papers 777, C.E.P.R. Discussion Papers.
    13. Peter Zadrozny, 1997. "An Econometric Analysis of Polish Inflation Dynamics with Learning about Rational Expectations," Economic Change and Restructuring, Springer, vol. 30(2), pages 221-238, May.
    14. Brian Pinto & Marek Belka & Stefan Krajewski, 1993. "Transforming State Enterprises in Poland: Evidence on Adjustment by Manufacturing Firms," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 24(1), pages 213-270.
    15. Welfe, Aleksander, 1996. " The Price-Wage Inflationary Spiral in Poland," Economic Change and Restructuring, Springer, vol. 29(1), pages 33-50.
    16. Kenneth J. Koford & Jeffrey B. Miller & David C. Colander, 1993. "Application of Market Anti-inflation Plans in the Transition to a Market Economy," Eastern Economic Journal, Eastern Economic Association, vol. 19(3), pages 379-393, Summer.
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