This paper emphasizes the fiscal underpinnings of the inflationary process and those particular dynamics when a dual price system is present. In particular, it explores the links between price controls and decontrols and the government budget, mainly through the flow of subsidies to either consumers or producers. A clear conclusion is that without consistency in macroeconomic policy, price liberalization may simply exacerbate imbalances and ultimately provide a mechanism for sustaining inflation, hence compromising a basic objective of macroeconomic policy.
Details
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Author
Commander, Simon Coricelli, Fabrizio
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Document Date
1990/12/31
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Document Type
Policy Research Working Paper
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Report Number
WPS555
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Volume No
1
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Total Volume(s)
1
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Country
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Region
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Disclosure Date
2010/07/01
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Doc Name
The macroeconomics of price reform in socialist countries : a dynamic framework
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Keywords
controlled price;market price;rate of growth of money;price reform;constant rate of money growth;inflation rate;relative price;speed of adjustment;price setting;increase in market prices;saddle path;price adjustment;real rate of interest;Socialist economies;price liberalization;price change;rate of inflation;price control;aggregate demand;real interest rate;raw material price;effect of price;reduction in subsidies;basket of good;centrally planned economy;dual pricing system;world market price;degree of competition;determination of price;domestic producer price;dual price system;cost pricing rule;exchange rate policy;Exchange rate policies;domestic market price;macroeconomic policy instrument;liberalization of prices;demand for money;profitability of enterprise;relative price movement;system of price;
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Citation
Commander, Simon Coricelli, Fabrizio
The macroeconomics of price reform in socialist countries : a dynamic framework (English). Policy, Research, and External Affairs working papers ; no. WPS 555. Macroeconomic adjustment and growth Washington, D.C. : World Bank Group. http://documents.worldbank.org/curated/en/429851468771614500/The-macroeconomics-of-price-reform-in-socialist-countries-a-dynamic-framework