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Price liberalization in the czech republic: shock therapy versus gradualism

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  • Jan Hanousek
  • Libor Krkoška

Abstract

Reform of the price system is a keystone of transition to a market economy. In all Visegrad countries, competition was introduced quite successfully through price liberalisation, removal of customs barriers and reduction of subsidies. Technically price liberalisation is easy to implement: the government simply announces that all agents can set their own prices from a certain date. The problem is political: necessary price liberalisation leads to income redistribution, and political and social frictions. In order to prevent a sharp rise in inflation, any resetting of prices has to be complemented by certain steps. Namely, a competitive environment should exist before actual price liberalisation. This assumes extensive privatisation and restructuralisation programs in the former centrally planned economies.

Suggested Citation

  • Jan Hanousek & Libor Krkoška, 1997. "Price liberalization in the czech republic: shock therapy versus gradualism," Prague Economic Papers, Prague University of Economics and Business, vol. 1997(3).
    • Handle: RePEc:prg:jnlpep:v:1997:y:1997:i:3:id:131
    DOI: 10.18267/j.pep.131
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    Cited by:

    1. Adam KUČERA & Aleš MARŠÁL, 2015. "Cost And Benefits Of Czech Economic Transformation: Macroeconomic Approach," Europolity – Continuity and Change in European Governance - New Series, Department of International Relations and European Integration, National University of Political Studies and Public Administration, vol. 9(1), pages 1-23.

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