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The Political Economy of Macroeconomic Developments, Central Bank and Tax System

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  • V. Vensel

Abstract

Estonia has made significant progress in the liberalisation of the economy and in macroeconomic stabilisation during the last years of economic transition. Tight monetary and fiscal policies have been the main factors of the macroeconomic stabilisation, and there are some important signs concerning the early stages of economic recovery. Some precautionary remarks include: a rapidly increasing trade balance deficit, high inflation, problems with collecting budgetary revenue, tax avoidance (and great tax arrears), the deepening of economic inequality, and increased political pressure by various interest groups to change successful economic policies. The currency board system with a pegged exchange rate regime is the corners tone of Estonian monetary policy. Some empirical results of the Estonian commercial banking systems performance is analysed and presented in the paper. For example, there was an overall decline in market-determined interest rates and the interest rate spread decreased substantially over the last year.

Suggested Citation

  • V. Vensel, 1996. "The Political Economy of Macroeconomic Developments, Central Bank and Tax System," CERT Discussion Papers 9606, Centre for Economic Reform and Transformation, Heriot Watt University.
  • Handle: RePEc:hwe:certdp:9606
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    References listed on IDEAS

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    1. Hillman, Arye L., 1994. "The transition from socialism: An overview from a political economy perspective," European Journal of Political Economy, Elsevier, vol. 10(1), pages 191-225, May.
    2. Michael Marrese & Mark Scott Lutz & Tapio Saavalainen & Vincent Koen & Biswajit Banerjee & Thomas Krueger, 1995. "Road Maps of the Transition; The Baltics, the Czech Republic, Hungary, and Russia," IMF Occasional Papers 127, International Monetary Fund.
    3. Daniel Citrin & Ashok Lahiri, 1995. "Policy Experiences and Issues in the Baltics, Russia, and Other Countries of the Former Soviet Union," IMF Occasional Papers 133, International Monetary Fund.
    4. Yavlinsky Grigory & Braguinsky Serguey, 1994. "The Inefficiency of Laissez-Faire in Russia: Hysteresis Effects and the Need for Policy-Led Transformation," Journal of Comparative Economics, Elsevier, vol. 19(1), pages 88-116, August.
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