Working Paper: CEPR ID: DP548
Authors: Michael C. Burda
Abstract: Pre-reform similarities between the ex-German Democratic Republic and Czechoslovakia serve as a basis for comparing two different approaches to marketizing centrally planned economies. The GDR freed trade in goods and fixed the exchange rate first, then liberalized domestic price setting, and took up privatization and budgetary consequences last; the CSFR is striving to implement the same reforms in reverse order. While the exchange rate matters decisively in the short run, institutional aspects of the two countries such as financing constraints, collective bargaining, and unemployment benefits will prove most important for long-run development of the two regions.
Keywords: macroeconomic reforms; german democratic republic; czechoslovakia; soft budget constraints; labour market policies
JEL Codes: J23; P21
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| nominal exchange rate (F31) | industrial output (L69) |
| judicious devaluation strategies (F31) | economic performance (P17) |
| labor market policies (J48) | economic outcomes (F61) |
| budget constraints (H60) | enterprise performance (L25) |
| collective bargaining and unemployment benefits (J52) | macroeconomic outcomes (E66) |