Uncontrolled Markets and the Inflationary Process in a Centrally Planned Economy

28 Pages Posted: 15 Feb 2006

See all articles by Nurun Choudhry

Nurun Choudhry

International Monetary Fund (IMF)

Date Written: July 26, 1989

Abstract

This paper analyzes the inflationary process in a centrally planned economy which has an uncontrolled market where prices can move more freely. The maintenance of controls over prices and rationing in the economy leads to the emergence of forces that generate inflation in the uncontrolled market, and that cause shrinkage of the controlled economy as resources move into the uncontrolled market. Decontrol of prices and production of the controlled market is the optimal policy. The adoption of this policy facilitates an increase in income and aggregate demand, which raises the equilibrium prices and total production in the economy.

JEL Classification: 021, 027, 134

Suggested Citation

Choudhry, Nurun, Uncontrolled Markets and the Inflationary Process in a Centrally Planned Economy (July 26, 1989). IMF Working Paper No. 89/59, Available at SSRN: https://ssrn.com/abstract=884874

Nurun Choudhry (Contact Author)

International Monetary Fund (IMF)

700 19th Street, N.W.
Washington, DC 20431
United States

Do you have negative results from your research you’d like to share?

Paper statistics

Downloads
74
Abstract Views
1,010
Rank
576,227
PlumX Metrics