Liberalization and the Behavior of Output During the Transition From Plan to Market

Author/Editor:

Ernesto Hernández-Catá

Publication Date:

April 1, 1997

Electronic Access:

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Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary:

This paper deals with liberalization and the evolution of output during the transition from plan to market. It explains why strong liberalization leads to a comparatively steep fall in output early in the transition, but a relatively strong recovery later on. Because it takes time to restructure the capital stock inherited from the old system, liberalization initially leads to transitional unemployment of capital and the contraction of the old enterprise sector. By making room quickly for the new, more efficient enterprises, however, liberalization also sets the stage for recovery and a much higher level of income in the medium term.

Series:

Working Paper No. 97/53

Subject:

Notes:

Also published in Staff Papers, Vol. 44, No. 4, December 1997.

English

Publication Date:

April 1, 1997

ISBN/ISSN:

9781451969979/1018-5941

Stock No:

WPIEA0531997

Format:

Paper

Pages:

29

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