ABSTRACT
In the 1930s, Czechoslovakia was one of the fifteen most developed countries in the world. This chapter focuses on one of the most exciting periods of modern history—1989 through 1991. Czechoslovakia was, at the outset of its systemic transformation, an economy almost completely dominated by central planning, with little experience of markets and almost no legal and institutional basis for a market economy. Prices were stable in Czechoslovakia as a result of prudent macroeconomic policies and price regulation. Czechoslovakia was the only country in Central and Eastern Europe to have managed a real devaluation on a sustained basis without having engaged in further nominal devaluations to offset domestic inflation. Fiscal considerations were not a constraint on the mode of privatization in Czechoslovakia. As Czechoslovak state-owned enterprises were privatized and began to react to market signals, it became important that the government ensured that companies were subject to the disciplinary force of competition.
