Shortages Under Free Prices: The Case of Ukraine in 1992

28 Pages Posted: 15 Feb 2006

See all articles by Alexander Sundakov

Alexander Sundakov

affiliation not provided to SSRN

Rolando Ossowski

International Monetary Fund (IMF)

Timothy Lane

International Monetary Fund (IMF) - Policy Development and Review Department

Date Written: January 1994

Abstract

This paper examines the coexistence of free prices and shortages for a range of consumer goods in Ukraine during 1992, Enterprises making consumer goods were substantially free to set market-clearing prices. Yet, Ukraine`s official consumer market experienced continued shortages, while the same goods traded at higher prices in parallel markets. The paper advances a model of enterprise behavior in an environment of central allocation of inputs at preferential prices. We show that central allocation of key inputs according to perceived "need" creates incentives for excess demand to be perpetuated despite formal price liberalization. The analysis brings forth the importance of abolishing allocation mechanisms for price liberalization to bring its full efficiency effects.

JEL Classification: D40, P22, P23, P31

Suggested Citation

Sundakov, Alexander and Ossowski, Rolando and Lane, Timothy, Shortages Under Free Prices: The Case of Ukraine in 1992 (January 1994). IMF Working Paper No. 94/10, Available at SSRN: https://ssrn.com/abstract=883429

Alexander Sundakov (Contact Author)

affiliation not provided to SSRN

No Address Available

Rolando Ossowski

International Monetary Fund (IMF) ( email )

700 19th Street NW
Washington, DC 20431
United States

Timothy Lane

International Monetary Fund (IMF) - Policy Development and Review Department ( email )

700 19th St. NW
Washington, DC 20431
United States
202-623-7648 (Phone)
202-623-4405 (Fax)

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