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Stagflationary Effects of Stabilization Programs in Reforming Socialist Countries: Enterprise-Side and Household-Side Factors

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  • Calvo, Guillermo A
  • Coricelli, Fabrizio

Abstract

Dismantling subsidies could give rise to serious macroeconomic difficulties in the short run. This article explores a view based on the enterprise sector as a central source and main channel of the stagflation phenomenon, using as an example the stagflation that followed the 1990 stabilization program in Poland. The stagflation phenomenon is linked to features of the financial market that are somewhat peculiar to reforming socialist economies: the weak credit links between households and enterprises, and the existence of large interenterprise debt. The policy implications of the enterprise-side view include more explicit consideration of initial conditions in the credit market, implementation of privatization schemes, and the development of a domestic banking system. Copyright 1992 by Oxford University Press.

Suggested Citation

  • Calvo, Guillermo A & Coricelli, Fabrizio, 1992. "Stagflationary Effects of Stabilization Programs in Reforming Socialist Countries: Enterprise-Side and Household-Side Factors," World Bank Economic Review, World Bank Group, vol. 6(1), pages 71-90, January.
  • Handle: RePEc:oup:wbecrv:v:6:y:1992:i:1:p:71-90
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    Cited by:

    1. Katharina Pistor & Martin Raiser & Stanislaw Gelfer, 2000. "Law and Finance in Transition Economies," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 8(2), pages 325-368, July.
    2. Natalia Isachenkova & Tomasz Marek Mickiewicz, 2003. "Ownership Characteristics and Access to Finance: Evidence from a Survey of Large Privatised Companies in Hungary and Poland," UCL SSEES Economics and Business working paper series 35, UCL School of Slavonic and East European Studies (SSEES).
    3. Thorne, Alfredo & DEC, 1993. "Eastern Europe's experience with banking reform : is there a role for banks in the transition?," Policy Research Working Paper Series 1235, The World Bank.
    4. Kazimierz Stanczak, 1992. "A Devaluation With Labor-Intensive Trading and Inelastic Labor Supply," UCLA Economics Working Papers 683, UCLA Department of Economics.
    5. Martin Raiser, 1995. ""Transition is a bridge, therefore do not dwell upon it" 1," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 3(2), pages 215-246, June.
    6. Buch, Claudia M., 1996. "Russian monetary policy: Assessing the track record," Kiel Working Papers 786, Kiel Institute for the World Economy (IfW).
    7. Corbo, Vittorio & Fischer, Stanley, 1991. "Adjustment programs and Bank support : rationale and main results," Policy Research Working Paper Series 582, The World Bank.
    8. Arjana BREZIGAR-MASTEN & Fabrizio CORICELLI & Igor MASTEN, 2009. "Financial integration and financial development in transition economies: What happens during financial crises?," RSCAS Working Papers 2009/49, European University Institute.
    9. Schmieding, Holger & Buch, Claudia, 1992. "Better banks for Eastern Europe," Kiel Discussion Papers 197, Kiel Institute for the World Economy (IfW).
    10. Aleksandra Zdzienicka, 2011. "A re-assessment of credit development in European transition economies," International Economics, CEPII research center, issue 128, pages 33-51.
    11. Fardmanesh, Mohsen & Tan, Li, 2003. "Wage and price control policies in transition economies," Journal of Development Economics, Elsevier, vol. 70(1), pages 173-200, February.
    12. Kazimierz Stanczak, 1994. "Endogenous Market Power and Adjustment under Fixed Exchange Rates: Interpreting the Polish Experience 1990-1991," UCLA Economics Working Papers 714, UCLA Department of Economics.
    13. Perkins, Frances C., 1994. "State enterprise reform and macro-economic stability in transition economies," Kiel Working Papers 665, Kiel Institute for the World Economy (IfW).
    14. Maxwell Fry, 1998. "Savings, Investment, Growth and Financial Distortions in Pacific Asia and Other Developing Areas," International Economic Journal, Taylor & Francis Journals, vol. 12(1), pages 1-24.
    15. Tomasz Marek Mickiewicz, 2005. "Post-communist recessions re-examined," UCL SSEES Economics and Business working paper series 55, UCL School of Slavonic and East European Studies (SSEES).
    16. Fry, Maxwell J. & Claessens,Constantijn A. & Burridge, Peter & Blanchet, Marie-Christine, 1995. "Foreign direct investment, other capital flows, and current account deficits : what causes what?," Policy Research Working Paper Series 1527, The World Bank.
    17. Raiser, Martin, 1994. "Ein tschechisches Wunder? Zur Rolle politikinduzierter Anreizstrukturen im Transformationsprozeß," Kiel Discussion Papers 233, Kiel Institute for the World Economy (IfW).
    18. Andrew Atkeson & Patrick J. Kehoe, 1995. "Optimal social insurance, incentives, and transition," Working Papers 546, Federal Reserve Bank of Minneapolis.
    19. Thorne,Alfredo Eduardo, 1992. "Issues in reforming financial systems in Eastern Europe : the case of Bulgaria," Policy Research Working Paper Series 882, The World Bank.
    20. José De Gregorio & Pablo Guidotti, 1992. "Notas sobre la Intermediación Financiera y Crecimiento Económico," Latin American Journal of Economics-formerly Cuadernos de Economía, Instituto de Economía. Pontificia Universidad Católica de Chile., vol. 29(87), pages 329-348.
    21. Luoana D. Santarossa, 2001. "Arrears as a Sign of Financial Repression in Transition Economies - The Case of Romania," CERT Discussion Papers 0104, Centre for Economic Reform and Transformation, Heriot Watt University.
    22. Mohsen Fardmanesh & Li Tan, 2009. "Structural Change in Transition Economies: Does Foreign Aid Matter?," Working Papers 982, Economic Growth Center, Yale University.
    23. Egert Juuse & Rainer Kattel, 2014. "Financialisation and the Financial and Economic Crises: The Case of Estonia," FESSUD studies fstudy20, Financialisation, Economy, Society & Sustainable Development (FESSUD) Project.
    24. Diehl, Markus, 1993. "Stabilization without crisis: The case of Vietnam," Kiel Working Papers 578, Kiel Institute for the World Economy (IfW).

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