Working Paper: NBER ID: w1875
Authors: Richard Portes
Abstract: The paper considers issues in recent research on macroeconomic equilibrium in centrally planned economies. I defend the explicit aggregative , macroeconomic approach in theory, institutional relationships and measurement. It has offered a fresh, coherent framework for analysis of many CPE phenomena, opened up a range of possibilities for empirical investigation, and generated several important spinoffs: work of planners' behavior, insights into CPE policy problems of the 1970s and early 1980s, which centred on macroeconomic equilibrium and threats to it; and some developments in market economy macro theory and econometrics. The quantity-rationing macro model and disequilibrium econometrics give a more useful as well as a more nuanced view of macroeconomic reality in CPEs than the conventional wisdom characterizing them as perpetual "shortage economies".
Keywords: macroeconomic disequilibrium; centrally planned economies; repressed inflation; economic policy
JEL Codes: No JEL codes provided
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| excess demand for consumption goods (D12) | reduction in effective labor supply (J22) |
| reduction in effective labor supply (J22) | decrease in output (E23) |
| excess demand for consumption goods (D12) | decrease in output (E23) |
| interaction between planners, enterprises, and labor market (J29) | feedback loop affecting overall economic performance (E32) |
| chronic repressed inflation (E31) | hidden inflationary pressures (E31) |
| behavior of households and planners in CPEs (D10) | transferability of behavioral models (C92) |
| significant inflation observed historically in CPEs (E31) | evidence supporting chronic shortages view (J23) |
| excess supply dominant regime in some CPEs (D51) | contradicting view of chronic shortages (Q31) |