State-owned Enterprises Behaviour in Transition Economies and Inflation (The Case of Bulgaria 1991-1995)

The study presents a dynamic model of inflation. The state-owned enterprises behaviour during the process of transition to a market economy has been thoroughly investigated. The model is based on the statistical data for Bulgarian economy, but its more general analytical framework allows its implementation in investigating other countries in transition, where public sector dominates the economy. According to the model presented in the paper, if prices of goods and services produced by state-owned enterprises change relatively slowlier than the overall price level, than there arise a contradiction in the direction of change in short- and longterm inflation dynamics.