chapter  4
32 Pages

Policy Modelling under Fixed and Flexible Price Regimes: SAM and CGE Transition Models Applied to Hungary and Poland

The proper approach to the transformation of the planning-oriented economies to market-oriented economies is a very controversial subject. Some economists have used the term shock therapy to emphasise the necessity of a change in mentality among consumers and producers. Others advocate a gradual approach to economic restructuring. Some support a combination of the two approaches. There are momentarily no operational frameworks that are able to appraise such choices against each other, or are able to monitor the actual results of any choice made. This is rendered most difficult in situations of hectic price changes and unstable relations that preclude the possibility of a reliable aggregation of data and empirical modelling during transition.