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The Causes of Recession following Stabilization

Author

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  • Stanislaw Gomulka
  • Paul Johnson

Abstract

This paper attempts the following two questions, both with reference to the response of the Polish economy to the stabilization and liberalization plan of January 1, 1990: why was the fall in output much larger and the inflation rate much higher than anticipated? Was the contraction of aggregate demand excessive? The paper argues that there is evidence for an excessively contractionary macroeconomic policy in the first quarter of 1990, but the policies in the second half of 1990 were, if anything, too expansionary. New interpretation is offered on the impact of devaluation on activity and on the reasons for understanding the inflation rate.

Suggested Citation

  • Stanislaw Gomulka & Paul Johnson, 1991. "The Causes of Recession following Stabilization," CEP Discussion Papers dp0033, Centre for Economic Performance, LSE.
    • Handle: RePEc:cep:cepdps:dp0033
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    Cited by:

    1. Gomulka, Stanislaw & Quah, Danny, 1994. "Lessons from economic transformation and the road forward," LSE Research Online Documents on Economics 2027, London School of Economics and Political Science, LSE Library.
    2. Jan Winiecki, 2002. "An Inquiry into the Early Drastic Fall of Output in Post-communist Transition: An Unsolved Puzzle," Post-Communist Economies, Taylor & Francis Journals, vol. 14(1), pages 5-29.
    3. Ariane Tichit, 1998. "Reprise économique dans les pays post-communistes : application d'un modèle de durée," Économie et Prévision, Programme National Persée, vol. 136(5), pages 73-92.
    4. 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 Kiel).
    5. ter Horst, H.A.F., 1996. "Socialism, Capitalism, and Transition with Special Reference to Poland," Other publications TiSEM 58e2e881-80c1-45a0-8ce8-7, Tilburg University, School of Economics and Management.
    6. Gomulka, S. & Lane, J., 1997. "Recession dynamics following an external price shock in a transition economy," Structural Change and Economic Dynamics, Elsevier, vol. 8(2), pages 177-203, June.
    7. Grzegorz W. Kolodko, 2018. "Socialism or capitalism? Tertium Datur," Economy and Forecasting, Valeriy Heyets, issue 1, pages 7-36.
    8. Falk, Martin & Raiser, Martin & Brauer, Holger, 1996. "Making sense of the J-curve: Capital utilisation, output, and total factor productivity in Polish industry 1990-1993," Kiel Working Papers 723, Kiel Institute for the World Economy (IfW Kiel).
    9. Stanislaw Gomulka & Danny Quah, 1994. "Lessons from Economic Transformation and the Road Forward," CEP Occasional Papers 05, Centre for Economic Performance, LSE.
    10. Stanislaw Gomulka, 1994. "Lessons from Economic Transformation and the Road Forward," CASE Network Studies and Analyses 0017, CASE-Center for Social and Economic Research.
    11. 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.
    12. Raiser, Martin & Nunnenkamp, Peter, 1993. "Output decline and recovery in Central Europe: the role of incentives before, during and after privatisation," Kiel Working Papers 601, Kiel Institute for the World Economy (IfW Kiel).
    13. Holger Schmieding, 1993. "From plan to market: On the nature of the transformation crisis," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 129(2), pages 216-253, June.
    14. Raiser, Martin, 1993. "Governing the transition to a market economy," Kiel Working Papers 592, Kiel Institute for the World Economy (IfW Kiel).
    15. Raiser, Martin, 1994. "Lessons for whom, from whom? The transition from socialism in China and Central Eastern Europe compared," Kiel Working Papers 630, Kiel Institute for the World Economy (IfW Kiel).
    16. Raiser, Martin, 1992. "Soft budget constraints: An institutional interpretation of stylised facts in economic transformation in Central Eastern Europe," Kiel Working Papers 549, Kiel Institute for the World Economy (IfW Kiel).

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