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...

This paper identifies obstacles hindering the transformation of centrally-planned economies (CPEs) into well-functioning market economies. The obstacles identified relate to (i) anticipatory dynamics, (ii) monetary overhang and the budget, and (iii) underdeveloped credit markets. It is...

The transition from plan to market has hinged on the development of a dynamic private sector that would serve as the engine of growth and employment creation. This paper examines the link between the availability of skilled workers and the creation of new private firms. Using a dynamic search...

This paper investigates the effects of macroeconomic and structural variables on financial intermediation. To this end, it presents a theoretical foundation for two new measures of intermediation, the money multiplier and the ratio of private sector credit to monetary base. Results from panel...

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...

In this paper we explore some of the informational problems that constrain the development of credit markets in transition economies. We characterize investment patterns under uncertainty and high costs of entry, when agents learn about the ultimate value of enterprises through production in a...

This paper investigates the main determinants of income inequality in transition countries during the period 1990-2018. To this end, we address a major methodological challenge that lies at the core of the cross-country literature on income inequality: the potential endogeneity of income growth,...

The paper uses data from transition economies in Central and Eastern Europe to assess four questions: (i) Did the standard blueprint for stabilization work, and was it implemented? (ii) To what extent was normal macroeconomics impeded by solvency problems in banks, and how successful have been...

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...