Macromodels of the Romanian transition Economy

The present book contains six chapters. In the first, the Romanian transition economy is characterized as a weakly structured economy (from the institutional point of view) with its main features: the poorly defined ownership rights, the limited effectiveness of new market mechanisms, the significant role of informal institutions, the behavioural instability of economic agents, the great influence of resources' allocation by the political factor. These features have many macroeconomic implications, of which three are especially analyzed: the waste of economic resources induced by the fuzzy ownership structure, by uncertainty and high transaction costs; the deep fracture between the real and nominal sectors; the presence of numerous economic activities not included in the official statistics (nonaccounted economy). The next chapter describes the main indicators used in the macromodel of the Romanian transition economy (definitions, symbols, specifications, relations among them, in accordance with the methodologies adopted by national statistics). The third chapter approaches the econometric problems. Unfortunately, the microeconomic foundations of the transition are not sufficiently studied and, in effect, in many cases we lack the necessary assumptions for building up econometric functions. On the other hand, the same statistical series are relatively short and are based on conventional simplifications imposed by the translation of the former methodologies (from material production system) to the language of the national accounts. Being weakly structured, the transition economy does not yet reveal consistent trends. Despite the unavoidable (under these conditions) instability of individual econometric functions, their integration into the macromodel, including the equilibrium constraints (accounting identities), can ensure acceptable results for short-run forecasts. Twenty econometric functions have been elaborated. They deal with: real output of the Romanian economy, domestic aggregate demand, investment,export, labour force, labour productivity, exchange rate, main deflators, labour incomes, households production for self-consumption, evolution of the nonaccounted economy, monetary processes. These functions reflect the peculiarities of the Romanian experience. It is possible that other transition economies may show similar tendencies, but eventual generalizations require supplementary researches. The fourth chapter is dedicated to the main version of the macromodel of the Romanian transition economy. Its tests for 1992 - 1995 (the 1994 - 1995 are presented herein), gave encouraging results. Consequently, it has been used for previsional estimations. Thus, in the fifth chapter, some possible scenarios of the evolution of the Romanian economy between 1996 - 2000 are examined. This analysis demonstrates that oniy a deep restructuring process is able to determine sound, long term sustainable, economic growth. Among the necessary policies I can mention: the realization of an ownership structure adequate to a modern market economy; the drastic limitation of inefficient economic activities subsidized by the state budget; the improvement of corporate governance; the progressive integration of Romania into the European and world economy; the effective functioning of different markets, including the capital one; maintenance of the inflation under control by a prudent monetary policy; lowering the share of the budget expenditures in GDP and the promotion, on this basis, of a rational fiscality. The last chapter examines an extended version of the macromodel, in which the general consolidated budget is explicitly presented. At the same time, other possible developments of the macromodel are outlined; its qualities and limits are mentioned. The most important problem remains the instability of the econometric functions. Consequently, it is necessary to reestimate them every year, taking into account new findings of the theory related to the transition and new statistical information. In other words, the macromodel must be permanently updated. In this way, a sort of sliding macroeconomic modelling is practiced. The appendices of the book contain a relevant set of macroeconomic indicators of Romania for the period 1980 -1995, the detailed presentation of the econometric functions and of the macroeconomic estimations, as well as a selective bibliography.