This paper constructs an intertemporal general equilibrium model designed to examine an economy in transition from central planning to being market oriented. A numerical algorithm is developed to obtain a solution for the model. Simulations using stylized country-specific data examine the...

The IMF Working Papers series is designed to make IMF staff research available to a wide audience. Almost 300 Working Papers are released each year, covering a wide range of theoretical and analytical topics, including balance of payments, monetary and fiscal issues, global liquidity, and...

This paper discusses issues related to the sequencing of the reforms that are necessary to transform the economies in Eastern Europe into market economies. It is first argued that the transition path of these economies will be smoother and less costly if a clear statement of the ultimate goals...

This paper discusses major fiscal issues faced by the previously centrally planned economies in their transition to market economies. It focuses on three main topics: (a) the extent to which the budget deficit should be a guide to policy; (b) the reforms that must be carried out in tax...

The primary function of banks during economic transformation is seen to be provision of an efficient payments mechanism. The lack of banking skills, particularly in credit allocation, is seen as the major problem in stable monetary systems. This is a problem which can be expected to last many...

The paper examines how the evolution from a classical centrally planned economy to a more market-oriented system will enhance the linkage between the exchange rate and the domestic price level. However, during the transition--as the economy continues to be predominantly state-owned, the...

A stylized fact of the transition process is an early profound exchange rate depreciation followed by continuing real appreciation. Absent historical reference points, it is difficult to judge whether the real appreciation is threatening competitiveness. This paper interprets the stylized facts...

This paper develops a simple two-sector model of a socialist economy, in which government revenues required for servicing external debt are obtained from taxation of the socialized sector and from import taxes. Wages and employment in the socialized sector are the outcome of Nash bargaining...

When a formerly centrally-planned economy frees prices and allows or compels producers to respond to market signals, conventional measures tend to severely overstate short–run output decline and inflation. In part the overstatement stems from neglect of private sector activity, or from belated...

A bilateral search model of the commodity market is formulated to study the effects of liberalizing prices in a reforming socialist economy. The main result is that if the competitive structure of the economy is not quickly modified to eliminate supply rents, price liberalization may be...