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Does Sequencing of Privatization Matter in Reforming Planned Economies?


  • Aasim M. Husain
  • Ratna Sahay


Although a centerpiece of the reform process in Central and Eastern Europe, large-scale privatization cannot be undertaken all at once and policymakers inevitably face the choice of privatizing some sectors before others. This paper analyzes the allocative efficiency implications of alternate sequences of privatization in a reforming planned economy with two sectors—an input-producing upstream sector and a final goods-producing downstream sector. The model focuses on the link, through a market for intermediate inputs, between the two sectors. The impact of exogenous shocks to the two sectors are highlighted to show how the inflexibility of public firms in responding to shocks constrains the production response of private firms operating in perfectly as well as imperfectly competitive markets.

Suggested Citation

  • Aasim M. Husain & Ratna Sahay, 1992. "Does Sequencing of Privatization Matter in Reforming Planned Economies?," IMF Working Papers 92/13, International Monetary Fund.
  • Handle: RePEc:imf:imfwpa:92/13

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    References listed on IDEAS

    1. Yongseok Shin & Rachel Glennerster, 2003. "Is Transparency Good for You, and Can the IMF Help?," IMF Working Papers 03/132, International Monetary Fund.
    2. Sebastian Edwards, 1983. "LDC's Foreign Borrowing and Default Risk: An Empirical Investigation," NBER Working Papers 1172, National Bureau of Economic Research, Inc.
    3. Barry Eichengreen & Ashoka Mody, 1998. "What Explains Changing Spreads on Emerging-Market Debt: Fundamentals or Market Sentiment?," NBER Working Papers 6408, National Bureau of Economic Research, Inc.
    4. Hong G. Min, 1998. "Determinants of emerging market bond spread : do economic fundamentals matter?," Policy Research Working Paper Series 1899, The World Bank.
    5. MacKinnon, James G, 1996. "Numerical Distribution Functions for Unit Root and Cointegration Tests," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 11(6), pages 601-618, Nov.-Dec..
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    Cited by:

    1. Singh, Nirvikar, 2010. "The Dynamics and Status of India’s Economic Reforms," MPRA Paper 24479, University Library of Munich, Germany.
    2. S. Nuri Erbas, 2002. "Primeron Reforms in a Second-Best Ambiguous Environment; A Case for Gradualism," IMF Working Papers 02/50, International Monetary Fund.
    3. Csaba, László, 1995. "A nemzetközi pénzügyi szervezetek és a keleteurópai rendszerátalakító politika
      [International financial organizations and the East European policies aimed at systemic transformation]
      ," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(2), pages 117-138.
    4. De Fraja, Gianni & Roberts, Barbara M, 2007. "Privatisation in Poland: What Was the Government Trying to Achieve?," CEPR Discussion Papers 6114, C.E.P.R. Discussion Papers.


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