Polish Economic Reform, 1990-91: Principles, Policies and Outcomes.

This paper suggests that, in the first year of the reform, achieving price stability was secondary to three other aims: a substantial increase of international reserves (large up-front devaluation required), a drastic reduction of the share of dollar currency in the total money supply (large monetary expansion required) and a major improvement of the quality of the price system (drastic increases of some administrative prices needed). It is argued that, contrary to the stabilization plans, the money supply was the main nominal anchor in the first year of the reform, and that the exchange rate and the incomes policy become nominal anchors in the second year of reform. The causes and consequences of this deviation from the plan are noted. The paper also discusses the causes of the growing fiscal imbalance since the beginning of 1990 and the relationship between the quality of macroeconomic control and the pace of structural change. Copyright 1992 by Oxford University Press.