Working Paper: NBER ID: w1076
Authors: Richard Portes; Richard Quandt; David Winter; Stephen Yeo
Abstract: This paper specifies and estimates a four-equation disequilibrium model of the consumption goods market in a centrally planned economy (CPE).The data are from Poland for the period 1955-1980, but the analysis is more general and will be applied to other CPEs as soon as the appropriate data sets are complete.The work reported here is based on previous papers of Portes and Winter and Charernza and Quandt.Portes-Winter applied to eachof four CPEs a discrete-switching disequilibrium model with a household demand equation for consumption goods, a planners'supply equation, and a "min" condition stating that the observed quantity transacted is the lesser of the quantities demanded and supplied.Charemza-Quandt considered how an equation for the adjustment of planned quantitites could be integrated into a CPE model with fixed prices and without the usual price adjustment equation.They made plan formation endogenous and permitted the resulting plan variables to enter the equations determining demand and supply.This paper implements the Charemza-Quandt proposal in the Portes-Winter context.It uses a unique new data set of time series for plans for the major macroeconomic variables in Poland and other CPEs.The overall framework is applicable to any large organisation which plans economic variables.
Keywords: Centrally Planned Economies; Consumption Goods; Disequilibrium Models; Macroeconomic Planning
JEL Codes: E30; P20
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| net financial assets (dnfa) (E01) | household desired expenditure on consumption goods (cd) (D12) |
| disposable income (yd) (D10) | household desired expenditure on consumption goods (cd) (D12) |
| announced consumption plan (c) (E20) | supply of consumption goods (cs) (E20) |
| deviations from planned output (E23) | supply of consumption goods (cs) (E20) |
| defense expenditure (H56) | supply of consumption goods (cs) (E20) |
| investment expenditure (E20) | supply of consumption goods (cs) (E20) |
| observed excess liquidity among households (D14) | consumption plans (c) (E21) |