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Savings and Stabilization Policy in a Pre-Post-Socialist Economy

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  • Bennett, John
  • Boycko, Maxim

Abstract

A simple macroeconomic model of a reforming socialist economy is presented with queuing in period one but market-clearing prices in period two. If queues grow longer, each household chooses to save more, not because it is 'forced' but to economize on queuing effort. For the benchmark case (perfect foresight), immediate price liberalization is the government's optimal policy. It raises welfare (the more so, the greater is the monetary overhang) and in terms of full prices it is deflationary, at least eventually. The model then is modified to allow for indexation, a resale market, adaptive expectations, and limited credibility. Copyright 1995 by Ohio State University Press.

Suggested Citation

  • Bennett, John & Boycko, Maxim, 1995. "Savings and Stabilization Policy in a Pre-Post-Socialist Economy," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 27(3), pages 907-919, August.
    • Handle: RePEc:mcb:jmoncb:v:27:y:1995:i:3:p:907-19
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    Cited by:

    1. Filippov, Mikhail G, 2002. "Russian Voting and the Initial Economic Shock of Hyperinflation," Public Choice, Springer, vol. 111(1-2), pages 73-104, March.
    2. Bennett, John & Dixon, Huw David, 1995. "Macroeconomic equilibrium and reform in a transitional economy," European Economic Review, Elsevier, vol. 39(8), pages 1465-1485, October.
    3. Cevdet Denizer & Holger C. Wolf, 2000. "The Saving Collapse during the Transition in Eastern Europe," The World Bank Economic Review, World Bank, vol. 14(3), pages 445-455, September.
    4. Erwin Nijsse & Elmer Sterken,, 1996. "Shortages, interest rates, and money demand in Poland, 1969-1995," Working Papers 25, Centre for Economic Research, University of Groningen and University of Twente.
    5. Debra Patterson, 1999. "An open-economy transition model," International Advances in Economic Research, Springer;International Atlantic Economic Society, vol. 5(1), pages 24-36, February.

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