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How Tight Is Too Tight? A Look at Welfare Implications of Distortionary Policies in Uzbekistan

Author

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  • Mr. David A. Grigorian
  • Mr. Edward R Gemayel

Abstract

Since independence in 1991, Uzbekistan has pursued a gradual approach to the transition from planned to market economy. This approach relied heavily on trade controls, directed credit, and large public investments. A number of financial sector measures were also instituted that distorted resource allocation and increased transaction costs. As a result, while possibly preventing the contraction of output in the early 1990s, these policies led to disappointing economic outcomes and social conditions. The paper reviews the underlying distortions and presents survey-based evidence to support their existence and their detrimental impact on economic activity. Looking forward, the paper-using a representative agent framework to model existing financial sector distortions-offers some guidance regarding the likely implications of eliminating the observed distortions on key aggregate variables. It suggests that the elimination of these distortions will enhance welfare and lead to increased investment and capital stock.

Suggested Citation

  • Mr. David A. Grigorian & Mr. Edward R Gemayel, 2005. "How Tight Is Too Tight? A Look at Welfare Implications of Distortionary Policies in Uzbekistan," IMF Working Papers 2005/239, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:2005/239
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    References listed on IDEAS

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    1. Mr. Stephen Tokarick, 2006. "Does Import Protection Discourage Exports?," IMF Working Papers 2006/020, International Monetary Fund.
    2. International Monetary Fund, 2000. "Welfare Effects of Uzbekistan's Foreign Exchange Regime," IMF Working Papers 2000/061, International Monetary Fund.
    3. Stockman, Alan C., 1981. "Anticipated inflation and the capital stock in a cash in-advance economy," Journal of Monetary Economics, Elsevier, vol. 8(3), pages 387-393.
    4. Ms. Katrin Elborgh-Woytek & Mr. Julian Berengaut, 2005. "Who is Still Haunted by the Specter of Communism? Explaining Relative Output Contractions Under Transition," IMF Working Papers 2005/068, International Monetary Fund.
    5. Feenstra, Robert C, 1985. "Anticipated Devaluations, Currency Flight, and Direct Trade Controls in a Monetary Economy," American Economic Review, American Economic Association, vol. 75(3), pages 386-401, June.
    6. Mr. Jeromin Zettelmeyer & Mr. Günther Taube, 1998. "Output Decline and Recovery in Uzbekistan: Past Performance and Future Prospects," IMF Working Papers 1998/132, International Monetary Fund.
    7. Richard Pomfret, 2003. "Economic Performance in Central Asia Since 1991: Macro and Micro Evidence1," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 45(4), pages 442-465, December.
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    Citations

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    Cited by:

    1. Frank Hespeler, 2013. "A VECM evaluation of monetary transmission in Uzbekistan," Economic Change and Restructuring, Springer, vol. 46(2), pages 219-253, May.
    2. MacDonald, Stephen, 2012. "Economic Policy and Cotton in Uzbekistan," MPRA Paper 70882, University Library of Munich, Germany.
    3. Dildora Tadjibaeva & Iroda Komilova, 2009. "The influence of tax reforms on the prosperity of micro-firms and small businesses in Uzbekistan," Asia-Pacific Development Journal, United Nations Economic and Social Commission for Asia and the Pacific (ESCAP), vol. 16(2), pages 31-64, December.

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    More about this item

    Keywords

    WP; cash; convertibility; convertibility restriction;
    All these keywords.

    JEL classification:

    • E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General
    • P23 - Political Economy and Comparative Economic Systems - - Socialist and Transition Economies - - - Factor and Product Markets; Industry Studies; Population
    • P27 - Political Economy and Comparative Economic Systems - - Socialist and Transition Economies - - - Performance and Prospects

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