ABSTRACT
The proposed methodology is applied to the design of a model which allows immediate transition into an open free market system for a small-to-medium size country, after a preparatory phase of 6 months. Under the model exchange rate, wage rates and protection levels are selected, taking into account their alternative consequences in terms of lost jobs, incomes and closed-down plants. The model is most suited for short-to-medium term planning of the industrial sector during transition, with a down-to-earth approach with respect to responses of economic agents, based on the estimated responses of goods producing sectors, to the new system. The model determines the exchange rate, wage rate and level of protection in a discretionary manner. The model gives estimates of total output, GDP, total profits and the wage bill, exports and imports. It allows determination of the fate of import substitution industries in a discretionary manner.
