ABSTRACT
Section one deals with macroeconomic implications of arrears. Arrears 'soften' markets and influence the system, apparently, in an ambivalent way: they seem to operate as a self-protecting device against the pressure for change (against the need to proceed with swift and fundamental reforms); at the same time, they can dangerously slow down the speed of restructuring and adjustment by relaxing financial discipline. Arrears tend to preserve a softbudget constraint syndrome. As temporary quasi-inside money arrears in fact fuel inflation: they enable firms to raise prices and wages without fearing immediate consequences. However, paradoxically, arrears can also have an anti-hyperinflationary potential. Since they are only a temporary substitute for real money, arrears work to 'endogenise' money supply dynamics in a perverse way.
