IMF Working Papers

Price Liberalization, Money Growth, and Inflation During the Transition to a Market Economy

By Ernesto Hernández-Catá

June 1, 1999

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Ernesto Hernández-Catá. Price Liberalization, Money Growth, and Inflation During the Transition to a Market Economy, (USA: International Monetary Fund, 1999) accessed November 21, 2024
Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

This paper examines the influence of economic liberalization and monetary growth on inflation during the transition from central plan to market. It concludes that price decontrol had a substantial, one-time effect on the price level but no lasting effect on inflation; that economic liberalization broadly defined may have helped dampen price increases; and that monetary expansion has been the fundamental determinant of inflation in the region. The paper also finds that the intensity of liberalization has been related to geographic proximity to market economies, to the size of the underground economy, and to the degree of political freedom.

Subject: Consumer prices, Conventional peg, Foreign exchange, Inflation, Monetary expansion, Monetary policy, Price controls, Prices

Keywords: Central and Eastern Europe, Consumer prices, Conventional peg, Eastern Europe, Equilibrium price price level, Inflation, Liberalization, Liberalization effort, Liberalization variable, Monetary expansion, Money, Original de Melo-Denizer-Gelb liberalization index, Original de Melo-Denzier-Gelb liberalization index, Price, Price controls, Price Decontrol, Price liberalization, Transition, WP

Publication Details

  • Pages:

    24

  • Volume:

    ---

  • DOI:

    ---

  • Issue:

    ---

  • Series:

    Working Paper No. 1999/076

  • Stock No:

    WPIEA0761999

  • ISBN:

    9781451849851

  • ISSN:

    1018-5941

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