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Obstacles to Transforming Centrally-Planned Economies: The Role of Capital Markets

Author

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

Abstract

This paper identifies obstacles hindering the transformation of centrally-planned economies (CPEs) into well-functioning market economies. The obstacles identified relate to (i) anticipatory dynamics, (ii) monetary overhang and the budget, and (iii) underdeveloped credit markets. It is demonstrated that these obstacles inhibit the effectiveness of price reform, monetary and credit policies, and trade liberalization. The analysis focuses on various ways to remove the obstacles. In this regard, a special examination is made of the implications of “cleaning” the balance sheets of enterprises and banks from nonperforming loans, as well as ways to enhance credibility. The paper concludes with a brief discussion of sequencing, “safety nets,” and their associated obstacles.

Suggested Citation

  • 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.
    • Handle: RePEc:imf:imfwpa:1991/066
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    Cited by:

    1. George Stubos & Ioannis Tsikripis, 2005. "Regional Integration Challenges in South East Europe: Banking Sector Trends," Working Papers 24, Bank of Greece.
    2. Schmieding, Holger & Buch, Claudia, 1992. "Better banks for Eastern Europe," Kiel Discussion Papers 197, Kiel Institute for the World Economy (IfW Kiel).
    3. Leong H. Liew, 1994. "Competitive Money Creation In China And In The Soviet Union," Metroeconomica, Wiley Blackwell, vol. 45(1), pages 1-16, February.
    4. Schmieding, Holger, 1991. "Transforming the financial system in Eastern Europe's market economies: A proposal for clean balance sheets and an institutional transfer," Kiel Working Papers 497, Kiel Institute for the World Economy (IfW Kiel).
    5. R. Sean Craig & Catherine L. Mann, 1992. "Fiscal implications of the transition from planned to market economy," International Finance Discussion Papers 424, Board of Governors of the Federal Reserve System (U.S.).

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