Working Paper: CEPR ID: DP758
Authors: John Bennett; Huw David Dixon
Abstract: 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.
Keywords: transitional economy; imperfect competition; macroeconomics
JEL Codes: D43; E10; P21; P51
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| monetary expansion (E50) | full prices (P22) |
| monetary expansion (E50) | output (C67) |
| monetary expansion (E50) | employment (J68) |
| price liberalization (P22) | full economic prices (P22) |
| price liberalization (P22) | average money prices (P22) |
| state-controlled output (P35) | oligopolistic output (D43) |