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Intertemporal Speculation, Shortages and the Political Economy of Price Reform

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  • van Wijnbergen, S.

    (Tilburg University, Center For Economic Research)

Abstract

How should countries like Poland or the U.S.S.R. move toward price flexibility, gradually or in a "big bang"? Why is it that Governments committed to eventual price flexibility so often seem to be unable to let go of "temporary" controls? How can one explain that after price increases early in a program of price controls, one often sees output rise while at the same time shortages seem to increase also? This paper argues that intertemporal speculation, hoarding and the political economy of price reform go a long way toward explaining all these puzzles. The author shows that the interaction between shortages and political vulnerability of reformist governments so early perceptions of failure make for a strong argument against gradualism in the decontrol of prices. Copyright 1992 by Royal Economic Society.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • van Wijnbergen, S., 1991. "Intertemporal Speculation, Shortages and the Political Economy of Price Reform," Discussion Paper 1991-49, Tilburg University, Center for Economic Research.
  • Handle: RePEc:tiu:tiucen:1340a8bd-1389-4148-b21a-659844fbe115
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    Cited by:

    1. Sweder J. G. van Wijnbergen & Tim Willems, 2016. "Learning Dynamics and Support for Economic Reforms: Why Good News Can Be Bad," World Bank Economic Review, World Bank Group, vol. 30(1), pages 1-23.
    2. Filippov, Mikhail G, 2002. "Russian Voting and the Initial Economic Shock of Hyperinflation," Public Choice, Springer, vol. 111(1-2), pages 73-104, March.
    3. Ganimian, Alejandro J., 2016. "Why do some school-based management reforms survive while others are reversed? The cases of Honduras and Guatemala," International Journal of Educational Development, Elsevier, vol. 47(C), pages 33-46.
    4. Cesar Martinelli & Mariano Tommasi, 1993. "Sequencing of Economic Reforms in the Presence of Political Constraints," UCLA Economics Working Papers 701, UCLA Department of Economics.
    5. 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.
    6. Djajic, Slobadan, 1999. "Shortages, Hoarding and Parallel-Market Premia in an Economy with Administered Prices," Review of Development Economics, Wiley Blackwell, vol. 3(1), pages 1-10, February.
    7. Amihai Glazer, 2012. "Handicaps on Timing to Improve Reputation," Working Papers 111210, University of California-Irvine, Department of Economics.
    8. Mehlum, Halvor, 2002. "Zimbabwe: Investments, credibility and the dynamics following trade liberalization: on the investment response during trade reform," Economic Modelling, Elsevier, vol. 19(4), pages 565-584, August.
    9. Hans J. Czap & Kanybek D. Nur-tegin, 2011. "Big Bang vs. Gradualism – A Productivity Analysis," EuroEconomica, Danubius University of Galati, issue 29, pages 38-56, August.
    10. Digdowiseiso, Kumba, 2010. "The transition of China and Ussr: A political economy perspective," MPRA Paper 22561, University Library of Munich, Germany.
    11. Bertocchi, Graziella & Spagat, Michael, 1997. "Structural uncertainty and subsidy removal for economies in transition," European Economic Review, Elsevier, vol. 41(9), pages 1709-1733, December.
    12. Berkowitz, Daniel, 1996. "On the persistence of rationing following liberalization: A theory for economies in transition," European Economic Review, Elsevier, vol. 40(6), pages 1259-1279, June.
    13. Mehlum, Halvor, 2001. "Capital accumulation, unemployment, and self-fulfilling failure of economic reform," Journal of Development Economics, Elsevier, vol. 65(2), pages 291-306, August.
    14. Mehlum, Halvor, 2001. "Speed of adjustment and self-fulfilling failure of economic reform," Journal of International Economics, Elsevier, vol. 53(1), pages 149-167, February.
    15. Diwan, Ishac & Saldanha, Fernando, 1991. "Long term prospects in Eastern Europe : the role of external finance in an era of change," Policy Research Working Paper Series 695, The World Bank.
    16. Sweder van Wijnbergen & Tim Willems, 2012. "Learning Dynamics and the Support for Economic Reforms: Why Good News can be Bad," Tinbergen Institute Discussion Papers 12-043/2, Tinbergen Institute.
    17. Gilles Saint-Paul, 2000. "The "New Political Economy": Recent Books by Allen Drazen and by Torsten Persson and Guido Tabellini," Journal of Economic Literature, American Economic Association, vol. 38(4), pages 915-925, December.
    18. Cesar Martinelli, 2001. "Essays on Political Economy of Political Reform," Levine's Working Paper Archive 625018000000000135, David K. Levine.

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