Table Of ContentPLANS AND DISEQUILIBRIA
IN CENTRALLY PLANNED ECONOMIES
(Empirical Investigation for Poland)
CONTRIBUTIONS
TO
ECONOMIC ANALYSIS
159
Honorary Editor:
J. TINBERGEN
Editors:
D. W. JORGENSON
J. WAELBROECK
NORTH-HOLLAND
AMSTERDAM NEW YORK · OXFORD · TOKYO
PLANS AND DISEQUILIBRIA
IN CENTRALLY PLANNED
ECONOMIES
(Empirical Investigation for Poland)
WOJCIECH CHAREMZA, MIROSLAW GRONICKI
University of Gdansk, Poland
NH
1988
NORTH-HOLLAND
AMSTERDAM · NEW YORK · OXFORD TOKYO
PWN—POLISH SCIENTIFIC PUBLISHERS · WARSAW
(ς) PWN—POLISH SCIENTIFIC PUBLISHERS—WARSZ AW A—1988
AU rights reserved. No part of this publication may be reproduced, stored in a retrieval
system, or transmitted in any form or by any means, electronic, mechanical, photo-
copying, recording or otherwise, without the prior permission of the copyright owner.
ISBN for this series: 0 7204 3100 X
ISBN for this volume: 0 444 70100 1
Publishers :
ELSEVIER SCIENCE PUBLISHERS B. V.
P. O. Box 1991
1000 BZ Amsterdam
The Netherlands
PWN—POLISH SCIENTIFIC PUBLISHERS
Warszawa
Sole distributors for the U. S. A. and Canada
ELSEVIER SCIENCE PUBLISHING COMPANY, INC.
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New York, N. Y. 10017
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Library of Congress Cataloging-in-Publication Data
Charemza, Wojciech.
Plans and disequilibria in centrally planned economies: empirical investi-
gation for Poland/Wojciech Charemza, Mirostaw Gronicki.
p. cm.—(Contributions to economic analysis: 159)
Bibliography: p.
ISBN 0-444-70100-1 (U.S.)
1. Equilibrium (Economics) 2. Economic policy. 3. Central planning—Poland.
4. Poland—Economic policy. I. Gronicki. Miroslaw. II. Title. III. Series.
HB145.C47 1987
339.5—dc 19 87-22891 C1P
PRINTED IN POLAND
INTRODUCTION TO THE SERIES
This series consists of a number of hitherto unpublished studies, which
are introduced by the editors in the belief that they represent fresh
contributions to economic science.
The term 'economic analysis' as used in the title of the series has been
adopted because it covers both the activities of the theoretical economist
and the research worker.
Although the analytical methods used by the various contributors
are not the same, they are nevertheless conditioned by the common
origin of their studies, namely theoretical problems encountered in
practical research. Since for this reason, business cycle research and
national accounting, research work on behalf of economic policy,
and problems of planning are the main sources of the subjects dealt
with, they necessarily determine the manner of approach adopted by the
authors. Their methods tend to be 'practical' in the sense of not being
too far remote from application to actual economic conditions. In addi-
tion they are quantitative.
It is the hope of the editors that the publication of these studies
will help to stimulate the exchange of scientific information and to
reinforce international cooperation in the field of economics.
The Editors
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CONTENTS
Introduction to the Series V
Contents VII
Preface IX
Part 1: Foundations
Chapter L Background: Facts and figures from
Polish economic history 3
Chapter 2. The theoretical model
2.1. Households' behaviour and expectations 9
2.2. State sector behaviour 19
2.3. Disequilibrium indicators 26
Part 2: Consumption-Labour-Money Analysis
Chapter 3. Econometric model and its estimation
3.1. Structural form and statistical data 37
3.2. Respecification and preliminary estimation 43
3.3. Final estimation 49
3.4. Linearization 55
Chapter 4. Estimates of disequilibria and their effects
4.1. Estimates of unconditional disequilibria 63
4.2. Measures of repressed inflation 70
4.3. Excess demand decomposition and estimates of conditional dis-
equilibria 74
VIII Contents
Chapter 5. Internal monetary policies
5.1. Policy simulations: Some theoretical and technical questions . .. 83
5.2. A simple PW policy 87
5.3. Planning distance and expectations errors 90
5.4. PWC#) policy and labour hoardings 96
5.5. Change of currency: Was it a solution? 99
Chapter 6. Searching for an optimal monetary policy
6.1. Disequilibrium neutralization as an optimal control problem . .. 105
6.2. Households' optimal income and money policies 107
6.3. Optimal policies and plans 113
Part 3: Extensions
Chapter 7. Disequilibria and investments: Some inward policies
7.1. Production and investments: First extension of the model . . .. 123
7.2. Inward effects of the PWH(5) policy: Consumption volume and plan-
ners' tensions 130
7.3. Direct interventions in investment: Smoothing and private economy
problem 135
7.4. Under- and overinvestment in a long-run 140
Chapter 8. Disequilibria and foreign trade : Some external policies
8.1. Foreign trade: A further extension of the model 145
8.2. Constant foreign debt isolated policy 150
8.3. Constant foreign debt and CMEA acitve policy 154
Chapter 9. Summary and conclusions: The best ex-post scenario? 161
Appendix 165
References 171
List of Tables 180
Author Index 182
Subject Index 185
PREFACE
The purpose of this study is to investigate interrelations between plan-
ning mechanisms and disequilibria in a case where the planning decisions
are centralized and are exogenously given to enterprises. A particularly
important question in this context is whether disequilibrium (or more
precisely: positive excess demand on consumption and labour markets)
is a necessary fate of centrally planned economies, or whether it could
be replaced by another disequilibrium regime at a certain stage of their
development. An answer to this can be given by discussing some
auxiliary problems: in particular—can a planning mechanism be used
as an efficient tool in reducing disequilibrium, what is the role of money,
prices and wages in excess demand formation, and is foreign trade an
accelerator or a brake with respect to equilibrium? Perhaps the most
controversial question is : 'Is it possible to equilibrate markets (to go
sufficiently close to equilibrium) over a certain period with the use of
some policy instruments and, if so, what should the desired levels
of these instruments be?'
Our intention has been to build a model which could be used generally
to answer these questions. It is exemplified by the case of the Polish
economy. Apart from our national preferences, Polish economy in the
sixties and seventies seems to be a promising field for the application
of a disequilibrium theory. Phenomena such as full employment and
growth, full employment and economic collapse, changes in foreign
trade and investment policies, overnight changes in the degree of
repressed inflation, 'price revolutions', panic buying and shortages were
more evident in Poland than in the other CMEA countries. Last but
not least, the statistical data which have been available to us are
in relatively good supply.
We have not tried to go beyond 1980. Since 1980 so many drastic
changes have been made in the economic structure of Poland that the
