Inter-Enterprise Arrears in a Post-Command Economy: Thoughts From a Romanian Perspective
IMF Working Papers, May 1, 1994
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Bibliographic details
- Authors: Daniel Daianu
- Published: May 1, 1994
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781451847451.001
Executive summary and core argument
- The paper considers that strain is the main source of inter-enterprise arrears in post-command economies.
- Strain is linked with the structure of the economy and the size of resource misallocation.
- Inter-enterprise arrears “soften” markets and operate as a self-protecting device against the pressure for change.
- As temporary quasi-inside money, arrears fuel inflation.
- The paper emphasizes a paradox of policy credibility in undertaking structural adjustment.
- Rising exports can be a possible side effect of arrears and a constraining factor; the size of the economy is seen as affecting the relationship between arrears and exports.
- Containing arrears is characterized as a process that will overlap in time with the evolving environment rather than a one-shot policy drive.
Findings and mechanisms
- Strain due to structural economic features and resource misallocation is identified as the primary driver of inter-enterprise arrears.
- Arrears functionally:
- “Soften” markets, reducing immediate market pressures for change.
- Act as a self-protecting device for enterprises embedded in a post-command structure.
- Operate as temporary quasi-inside money, contributing to inflationary pressures.
- Policy credibility issues arise when attempting structural adjustment because measures to contain arrears interact with incentives and expectations across enterprises.
- Relationship between arrears and exports:
- Rising exports may be a side effect of arrears.
- The size of the economy influences how arrears and exports interact, potentially constraining adjustment options.
Policy recommendations and operational framework
- An operational framework for containing arrears would include:
- “Breaking up” structure.
- Imposing a disciplining “straitjacket” on structure.
- Industrial policy, described as “picking losers among losers.”
- Targeted external assistance.
- Emphasis that containing arrears cannot be a one-shot policy; it requires a sustained, phased process aligned with the evolving economic environment.
Subject areas and keywords (as listed in the source)
- Subjects: Arrears, Budget planning and preparation, Currencies, Exports, External debt, Financial services, Inflation, International trade, Prices, Public financial management (PFM), Real interest rates
- Keywords: Arrears, Budget planning and preparation, Eastern Europe, enterprise behavior, enterprise reform, enterprises running, Exports, freedom enterprise, Inflation, Inter-enterprise arrears, market economy, nonviable enterprise, Real interest rates, structural adjustment, Western Europe, WP