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

Author

Listed:
  • Guillermo Calvo
  • 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

  • Guillermo Calvo & Jacob A. Frenkel, 1991. "Obstacles to Transforming Centrally-Planned Economies; The Role of Capital Markets," IMF Working Papers 91/66, International Monetary Fund.
  • Handle: RePEc:imf:imfwpa:91/66
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    References listed on IDEAS

    as
    1. Fischer, Stanley & Gelb, Alan, 1990. "Issues in socialist economy reform," Policy Research Working Paper Series 565, The World Bank.
    2. Fisher, S. & Gelb, A., 1990. "Issues In Socialist Economy Reform," Working papers 567, Massachusetts Institute of Technology (MIT), Department of Economics.
    3. Jacob A. Frenkel & Rudiger Dornbusch & William H. Branson & Ricardo H. Arriazu, 1983. "Panel Discussion on Southern Cone," IMF Staff Papers, Palgrave Macmillan, vol. 30(1), pages 164-184, March.
    4. Lawrence J. Brainard, 1991. "Reform in Eastern Europe: creating a capital market," Economic Review, Federal Reserve Bank of Kansas City, issue Jan, pages 49-58.
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    Citations

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    Cited by:

    1. 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).
    2. 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.).
    3. Schmieding, Holger & Buch, Claudia, 1992. "Better banks for Eastern Europe," Kiel Discussion Papers 197, Kiel Institute for the World Economy (IfW).

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