The paper examines the inflation targeting regime in the context of transition economies. Recent years have witnessed an increasing number of central banks in these countries moving towards the implementation of inflation targeting regimes. However, the success of such a regime depends largely...

A fundamental tenet in economic theory - which was confirmed by reality - is that a command system allocates resources poorly because of the impossibility of economic calculation'. Therefore, once prices are freed and start to operate at quasi-equilibrium (market-clearing) levels, the hidden...

This paper develops two stylised models of the transitional economy that challenge to some extent, the conventional approach to policy-reforms. In the first model, the absence of market-oriented institutions is responsible for the occurrence of a non-cooperative equilibrium, where the amount of...

This study considers strain to be the main source of arrears; strain can be linked with the structure of the economy and the size of resource misallocation. The focus here is on the real side of the economy in explaining the growth of arrears and on exploring avenues for their reduction. Arrears...

The paper interprets the dynamics of the underground economy in a transforming environment by highlighting the role of institutions in enforcing the rules of the game and the phenomenon of strain. A basic idea is that the underground economy emerges as a means for the system to diffuse its...