Moderate Inflation in Poland: A Real Story

Author/Editor:

Thierry Pujol ; Mark E Griffiths

Publication Date:

June 1, 1996

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:

Why is moving from moderate to low inflation almost always slow or costly? This paper answers this question, based on the Polish experience. First, reflecting the transition to a market economy, Polish inflation has been marked by significant changes in relative prices. Second, as wage and price indexation takes root, the inflationary effect of shocks to relative prices is magnified. Third, lagging structural reform, including the failure to extend hard budget constraints to all sectors of the economy, makes monetary policy less effective. Reduced money supply growth with structural reform offers the best prospect for moving to low inflation.

Series:

Working Paper No. 1996/057

Subject:

Consumer price indexes Exchange rates Foreign exchange Inflation Monetary policy Monetary tightening Price adjustments Prices

English

Publication Date:

June 1, 1996

ISBN/ISSN:

9781451967432/1018-5941

Stock No:

WPIEA0571996

Pages:

44

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