Inflation in Czechoslovakia, 1985-91

The authors assess inflation in Czechoslovakia between 1985 and 1991 and identify the main causes of inflation through a literature survey and empirical studies. The official prices in centrally planned economies were never perceived by central planners to be fully market clearing. Only by coincidence would the overall price level correspond to the level associated with general equilibrium. What is missing in official price indices in centrally planned economies - including the consumer price index - is suppressed inflation, manifast in queuing for products, forced substitution of demand, and forced savings. Also missing is hidden inflation, associated with practices that disguise price increases behind cosmetic or other change in product quality. The authors argue that inflationary pressures in Czechoslovakia in 1985-89 originated mainly in the investment sector. Even though the investment sector was strictly controlled, making it difficult for open inflation to emerge, the scope for inflationary pressures was great in Czechoslovakia. Such pressures arose from a mixture of factors, including poor investment planning, accommodating government finance, and the high priority given to investments and social consumption. For Czechoslovakia, the official price indices show virtually no inflation between 1985 and 1989, when there were long waiting lists for such products as cars and state and cooperative flats. Trends in these price indices do not seem to depend on the method used for constructing them, according to the sensitivity tests conducted by Czechoslovakia's Federal Statistical Office. Obviously, the official price indices failed to capture the full extent of economic disequilibrium in that period. But the extent to which official price indices understated inflationary pressures was not serious in Czechoslovakia, compared with other centrally planned economies. Estimates of hidden inflation for 1985-89 range from 0.5 percent to 2 percent a year in consumer markets and about 3 percent in the industrial sector. Estimates for suppressed inflation were less than 5 percent. The relatively small inflationary gap is indirectly confirmed by the sharp inflation associated with the recent price liberalization that subsided in a relatively short period, and both suppressed and hidden inflations have virtually disappeared. Estimates of hidden inflation were based on benchmark price comparisons between Czechoslovakia and such market economies as Austria. Those for suppressed inflation were based on disequilibrium econometric models of asset holdings and on conjecture tests.Economic Theory&Research,Environmental Economics&Policies,Markets and Market Access,Access to Markets,Financial Intermediation

Price and quality competitiveness of socialist countries'exports

In this report the authors have analyzed pricing of the centrally planned economies (CPEs) in the highly competitive export markets of the EC countries in the first half of the 1980s. They found that the CPEs'export prices were lower than prices in both developed and developing countries. Manufactured goods from CPEs were underpriced an average 31 to 45 percent - even more on some commodities. Protection of EC countries doesn't seem to be a factor in CPE underpricing of manufactured goods. This could not be explained either by a deliberate policy of CPEs to penetrate Western markets. The CPEs inability to upgrade manufactured exports that are subject to quotas suggests serious quality constraints on exports of manufactured goods. They appear to underprice their manufactured exports not because of cost advantages that make them more competitive, but because most of their manufactured goods are inferior in quality to their competitors.Environmental Economics&Policies,TF054105-DONOR FUNDED OPERATION ADMINISTRATION FEE INCOME AND EXPENSE ACCOUNT,Economic Theory&Research,Markets and Market Access,Access to Markets

Les modifications des prix relatifs mondiaux et leur transmission dans les économies protégées par le monopole du commerce extérieur

Changes in Relative World Prices and their Transmission into Economies Protected by Foreign Trade Monopoly The main purpose of this paper is to discuss transmission channels of external disturbances into economies protected and insulated by a foreign trade monopoly, such as the centrally planned economies (CPEs). One of such external disturbances has been the change in relative commodity prices in world markets which altered the pattern of comparative advantages for all countries participating in world trade. The paper describes the mechanism which enables the CPEs to absorb external shocks as well as the signals at micro-level for structural change. Transmission channels do exist : they are intermediated by central authorities in the form of policy instruments or they may take the form of financial links between the external and internal sectors.Cet article a pour but essentiel d'analyser les modes de transmission des perturbations externes dans les économies protégées et isolées par le monopole du commerce extérieur, telles les économies centralement planifiées (ECP). L'une de ces perturbations externes a été le changement des prix relatifs sur les marchés mondiaux qui a altéré la structure des avantages comparés pour tous les pays engagés dans le commerce international. L'auteur décrit le mécanisme qui permet aux ECP d'absorber les chocs extérieurs ainsi que les signaux qui s'allument au niveau micro-économique pour engager à des changements structurels. Les canaux de transmission existent : les autorités centrales les médiatisent sous forme d'instruments de leur politique; à moins qu'ils ne prennent la forme de liens financiers entre les secteurs interne et extérieur.Drabek Zdenek. Les modifications des prix relatifs mondiaux et leur transmission dans les économies protégées par le monopole du commerce extérieur. In: Revue d’études comparatives Est-Ouest, vol. 15, 1984, n°1. pp. 61-74