Price Reform and Durable Goods in the Transition to a Market Economy

IMF Working Papers, June 1, 1993

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Canonical URL: Price Reform and Durable Goods in the Transition to a Market Economy

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Bibliographic details

Authors: Pierre-Richard Agénor
Published: June 1, 1993
Series: IMF Working Papers
DOI: https://doi.org/10.5089/9781451972917.001

Summary

The paper examines the short- and long-term effects of price liberalization in a reforming socialist economy.
Analysis is based on an optimizing framework that highlights hoarding behavior and the existence of parallel goods markets.
The paper characterizes the behavior of:
- official and parallel market prices,
- stock of durables,
- velocity of money

in the transition period between reform announcement and reform implementation, both in the presence and absence of uncertainty about the transition date.

Analytical Framework

Optimizing framework emphasizing:
- hoarding behavior among agents,
- coexistence of official and parallel goods markets.
Focus on dynamics during the transition window between announcement and implementation of price reform.

Key Findings and Characterizations

Short-term and long-term effects of price liberalization are analyzed within the same optimizing model.
Characterization covers:
- official market prices versus parallel market prices,
- evolution of the stock of durables,
- changes in the velocity of money,
- distinctions between outcomes with and without uncertainty about the transition date.

Subjects and Keywords (as stated)

Subject: Asset prices, Financial institutions, Financial services, Inflation, Price controls, Prices, Real interest rates, Stocks
Keywords: Asset prices, durable goods, Eastern Europe, excess demand, free market, Inflation, liberalization program, market price, nominal interest rate, Price controls, price liberalization, Real interest rates, socialist economy, stock of durables, Stocks, WP