DP758 Macroeconomic Equilibrium and Reform in a Transitional Economy

Author(s):	Huw David Dixon
Publication Date:	January 1993
Keyword(s):	Imperfect Competition, Macroeconomics, Transitional Economy
JEL(s):	D43, E10, P21, P51
Programme Areas:	International Macroeconomics
Link to this Page:	cepr.org/active/publications/discussion_papers/dp.php?dpno=758

We build a general equilibrium macroeconomic model of a transitional economy to reflect five stylized facts. Among these are that central planning has left a legacy of highly concentrated industry and a residue of price controls and rationing. An `almost Classical' dichotomy obtains in the model: monetary expansion leaves output and unemployment unchanged (despite the existence of unemployment), though leisure time declines. The economy displays a high degree of complementarity between the state-controlled sector and the private sector, however, giving rise to multiplier effects. We analyse the effects of price liberalization and privatization in this framework.