Price Liberalization, Money Growth, and Inflation During the Transition to a Market Economy

24 Pages Posted: 13 Feb 2006

Date Written: June 1999

Abstract

This paper examines the influence of economic liberalization and monetary growth on inflation during the transition from central plan to market. It concludes that price decontrol had a substantial, one-time effect on the price level but no lasting effect on inflation; that economic liberalization broadly defined may have helped dampen price increases; and that monetary expansion has been the fundamental determinant of inflation in the region. The paper also finds that the intensity of liberalization has been related to geographic proximity to market economies, to the size of the underground economy, and to the degree of political freedom.

Keywords: Liberalization, Price Decontrol, Money, Transition

JEL Classification: E31, E41, P22

Suggested Citation

Hernández-Catá, Ernesto, Price Liberalization, Money Growth, and Inflation During the Transition to a Market Economy (June 1999). IMF Working Paper No. 99/76, Available at SSRN: https://ssrn.com/abstract=880603

Ernesto Hernández-Catá (Contact Author)

International Monetary Fund (IMF) ( email )

700 19th Street NW
Washington, DC 20431
United States
202-623-4531 (Phone)

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