Price Liberalization, Money Growth, and Inflation During the Transition to a Market Economy
IMF Working Papers, June 1, 1999
Source details
- Canonical URL
- Price Liberalization, Money Growth, and Inflation During the Transition to a Market Economy
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Bibliographic details
- Authors: Ernesto Hernández-Catá
- Published: June 1, 1999
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781451849851.001
Summary and central conclusions
- The paper examines the influence of economic liberalization and monetary growth on inflation during the transition from central plan to market.
- Main conclusions:
- Price decontrol had a substantial, one-time effect on the price level but no lasting effect on inflation.
- Economic liberalization broadly defined may have helped dampen price increases.
- Monetary expansion has been the fundamental determinant of inflation in the region.
- Additional finding:
- 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.
Subjects and keywords (as provided)
- Subjects: 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
Analytical implications (as stated in source)
- Price decontrol:
- Produced a one-time upward effect on the price level.
- Did not produce a persistent increase in the ongoing inflation rate.
- Economic liberalization:
- May have acted to moderate inflationary pressures during transition.
- Intensity of liberalization correlated with proximity to market economies, size of underground economy, and degree of political freedom.
- Monetary policy:
- Monetary expansion is identified as the fundamental determinant of inflation in the region, indicating that control of money growth is central to managing inflation during transition.
IMF Working Paper by Ernesto Hernández-Catá, Working Paper No. 1999/076