Obstacles to Transforming Centrally-Planned Economies : The Role of Capital Markets

Author/Editor:

Guillermo Calvo ; Jacob A. Frenkel

Publication Date:

July 1, 1991

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 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 demonstrated that these obstacles inhibit the effectiveness of price reform, monetary and credit policies, and trade liberalization. The analysis focuses on various ways to remove the obstacles. In this regard, a special examination is made of the implications of “cleaning” the balance sheets of enterprises and banks from nonperforming loans, as well as ways to enhance credibility. The paper concludes with a brief discussion of sequencing, “safety nets,” and their associated obstacles.

Series:

Working Paper No. 91/66

Subject:

English

Publication Date:

July 1, 1991

ISBN/ISSN:

9781451848724/1018-5941

Stock No:

WPIEA0661991

Format:

Paper

Pages:

19

Please address any questions about this title to publications@imf.org