Stagflationary Effects of Stabilization Programs in Reforming Socialist Countries: Enterprise-Side and Household-Side Factors |
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| Authors: | Calvo, Guillermo A. Coricelli, Fabrizio |
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| Affiliation: | Guillermo A. Calvo is in the Research Department at the International Monetary Fund, and Fabrizio Coricelli is in the Country Economics Department at the World Bank. The authors would like to acknowledge the useful comments by Eduardo Borensztein, Luis de la Calle, Roman Frydman, Stanislaw Gomulka, Peter Hole, Timothy Lane, Massimo Russo, Andrés Solimano, Ulrich Thumm, and three anonymous referees and to thank Barbara Ossowicka for her efficient research assistance. |
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| Abstract: | Dismantling subsidies could give rise to serious macroeconomicdifficulties in the short run. This article explores a viewbased on the enterprise sector as a central source and mainchannel of the stagflation phenomenon, using as an example thestagflation that followed the 1990 stabilization program inPoland. The stagflation phenomenon is linked to features ofthe financial market that are somewhat peculiar to reformingsocialist economies: the weak credit links between householdsand enterprises, and the existence of large interenterprisedebt. The policy implications of the enterprise-side view includemore explicit consideration of initial conditions in the creditmarket, implementation of privatization schemes, and the developmentof a domestic banking system. |
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