Monetary and real disequilibrium in Soviet-type economies
Abstract
Planners in Soviet-Type Economies (STE's) allocate resources via directives established by plans. Plans have both real and financial components. The real plan specifies the planned, real transfers of resources between economic agents. The financial plan specifies the flows of liquidity which are deemed necessary to support the real transfers specified by the real plan. For the real plan to form a binding constraint on the decisions of economic agents, the financial plan must support, and not allow economic agents to transgress, the real plan. This dissertation develops Allen's (1982) hypothesis that in a planned economy, as in a market economy, real movements are reflected in monetary movements. The dissertation elaborates a formal macro-economic model of a hypothetical STE which explicitly considers both real and monetary sectors. It is shown that disequilibrium in STE's can be modeled from the monetary side. An explicit treatment of the disequilibrating effects of Kornai's "soft budget constraint" is given. Additionally, the effects of "monetary overhang" on the behavior of households are considered. In the final chapters of the dissertation, the theoretical framework is utilized to model the plausible disequilibrating effects of investment cycles in STE's. It is shown how monetary and real disequilibrium may develop during an investment cycle. The predictions of the model are checked using data from the Soviet Union.
Degree
Ph.D.
Advisors
Carlson, Purdue University.
Subject Area
Economics
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