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From Centrally-Planned to Market Economies: The Road from CPE to PCPE

Author

Listed:
  • Mr. Jacob A. Frenkel
  • Mr. Guillermo Calvo

Abstract

This paper deals with the early stages of transformation of centrally-planned economies (CPEs) into market economies during which expectations play a key role. It focuses on the transitional phase during which the economy is not any more a CPE but has not yet become a market economy. During this phase the economy is referred to as a “previously centrally-planned economy” (PCPE). A simple model is developed to analyze the consequences of expected price liberalization. The CPEs undergoing transformation lack depth and breadth of financial markets. The analysis illustrates the benefits from an early development of such markets. It demonstrates the cost of a fine-tuning strategy and the benefits from a quick implementation of price reform. The paper also examines means to reduce “liquidity overhang,” and shows that they involve taxation of one form or another. The consequences of privatization are analyzed and the benefits from an early development of an effective tax system highlighted.

Suggested Citation

  • Mr. Jacob A. Frenkel & Mr. Guillermo Calvo, 1991. "From Centrally-Planned to Market Economies: The Road from CPE to PCPE," IMF Working Papers 1991/017, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:1991/017
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    Cited by:

    1. Donald Cox & Emmanuel Jimenez & Wlodek Okrasa, 1997. "Family Safety Nets And Economic Transition: A Study Of Worker Households In Poland," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 43(2), pages 191-209, June.
    2. Papazoglou, Christos & Pentecost, Eric J., 2004. "The dynamic adjustment of a transition economy in the early stages of transformation," Journal of Macroeconomics, Elsevier, vol. 26(3), pages 547-561, September.
    3. Steve H. Hanke and Kurt Schuler, 1993. "Currency Boards and Currency Convertibility," Cato Journal, Cato Journal, Cato Institute, vol. 12(3), pages 687-727, Winter.
    4. Goldberg, Linda S. & Karimov, Il'dar, 1997. "Black markets for currency, hoarding activity and policy reforms," Journal of International Economics, Elsevier, vol. 42(3-4), pages 349-369, May.
    5. Fardmanesh, Mohsen & Tan, Li, 1996. "Wage and Price Control Policies in Socialist Transitional Economies," Center Discussion Papers 28515, Yale University, Economic Growth Center.
    6. Linda S. Goldberg & Ildar Karimov, 1992. "Black-Markets for Currency, Hoarding Activity and Currency Reform," NBER Working Papers 4153, National Bureau of Economic Research, Inc.
    7. A. James Meigs, 1993. "Eurodollars: A Transition Currency," Cato Journal, Cato Journal, Cato Institute, vol. 12(3), pages 711-730, Winter.
    8. Mr. Guillermo Calvo & Mr. Jacob A. Frenkel, 1991. "Obstacles to Transforming Centrally-Planned Economies: The Role of Capital Markets," IMF Working Papers 1991/066, International Monetary Fund.
    9. Guillermo A. Calvo & Jacob A. Frenkel, 1991. "Credit Markets, Credibility, and Economic Transformation," Journal of Economic Perspectives, American Economic Association, vol. 5(4), pages 139-148, Fall.
    10. 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.
    11. Chadha, Bankim & Coricelli, Fabrizio, 1997. "Fiscal constraints and the speed of transition," Journal of Development Economics, Elsevier, vol. 52(1), pages 221-249, February.
    12. Truong Dhd. & Gates, C. L., 1992. "Effects of government policies on the incentive to invest, enterprise behaviour and employment: the case study of Vietnam," ILO Working Papers 992878513402676, International Labour Organization.
    13. Bomhoff, Eduard J., 1992. "Monetary reform in Eastern Europe," European Economic Review, Elsevier, vol. 36(2-3), pages 454-458, April.

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