ECN Week 6
Popular in Economy of Eastern Europe
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This 3 page Class Notes was uploaded by Andrew Bashor on Sunday February 28, 2016. The Class Notes belongs to POL/ECN/HIS 370 at a university taught by Dr. Pellillo in Spring 2016. Since its upload, it has received 24 views.
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Date Created: 02/28/16
Transition Economics 02/25/2016 ▯ Economic Changes Price liberalization o Prices determined by the market o Get rid of shortages by going to equilibrium price o Prices generally rise but balance if keep supply same with no new entrepeneurs o Expect price rises o Might be necessary o Progress on price liberalization* 1. Prices formally controlled by gov. 2. Some life of price admin. State procurement at non- market prices 4 majority of product categories 3. Signif progress on price lib, but state procurement @ non-market prices remains substantial 4. Comprehensive liberalization, state procurement @ non-market prices lrgly phased out, only small # of administered prices remain 4+ complete price liberalization o generally first step taken Deregulation o State-owned to private markets o How much control does one give up Financial market development Tax reform o Hyperinflation must be considered ▯ Legal Changes Bankruptcy laws o Intellectual Property Rights (IPR’s) Without ties to WTO, protection not going to happen Entrepeneurship may be hindered Need a way to enforce property rights Trade liberalization o Trade what with whom? Should reinforce linkeges with previous countries Should look more diversified portfolio Attracting Foreign Direct Investment (FDI) o Enterprise restructuring ▯ Monetary policy Establish own currency o Initial peg for stability Some countries stuck with the reubel Allows countries 2 have independent economy from Russia o Eventually float ▯ Fiscal Policy Cut expenditures and subsidies Stabilize tax rates Cap expenditures as % of GDP International relations o IMF o World Bank o Integration with IFI’s (international financial institutions) ▯ Privatization of state-owned enterprises ??? Will the private people/corporations take too much power? Will loss of revenue take place? ▯ What role does state play…? Education Health o Universal? o Private? Pensions o Disappear? o Keep them? Unemployment and retraining programs o Large unemployment during transition o Opportunities for new entrepeneurs o What happens when basics cannot be provided? Other welfare programs ▯ What approach should be taken? Shock therapy o Washington Concensus o Good for capitalism, not quite on transition Gradualism o Slow integration of different policies Spending o Accumulate debt in order to quickly build economy o Not always great because doesn’t always pay off ▯ Issues Get ready for international competition o low quality o inefficient o useless products o consumers would rather import lack of expertise o few entrepeneurs know how to run business o bringing in foreigners Premature deindustrialization o Some workers return to agriculture o Others go to service industry ▯ ▯ ▯ ▯