Inflation and Stabilization in Transition Economies: A Comparison with Market Economies
Summary:
A simple model is developed to understand inflationary pressures and stabilization in nonmarket economies. In light of the model, the paper reviews the inflation and stabilization experiences of several transition economies in Eastern Europe and the former Soviet Union. These experiences are then compared to those of high inflation market economies. The paper concludes that, despite significant differences in the economic structure and institutional framework, the inflation and stabilization experiences in transition and market economies are similar in many respects. In particular, monetary accommodation and lack of fiscal discipline are critical in sustaining inflation, and exchange rate-based anchors seem more successful than money anchors in bringing down inflation. On the other hand, wage policies appear to be more critical in reigning inflation in transition economies than in market economies.
Series:
Working Paper No. 1995/008
Subject:
Inflation Labor Monetary base Monetary policy Money Nominal anchors Prices Wage policy Wages
English
Publication Date:
January 1, 1995
ISBN/ISSN:
9781451842487/1018-5941
Stock No:
WPIEA0081995
Pages:
68
Please address any questions about this title to publications@imf.org