ABSTRACT
Hungary adopted the gradualist reform approach. According to Simon Commander and Fabrizio Coricelli, inflation in Hungary had a marked inertial component, due to the large share of administered prices. In Hungary “although foreign prices are important in the transmission of inflation, cost-side factors have greater weight.” In Hungary centrally imposed wage norms and bargaining rules restricted wage drift. Reforms since 1990 in Hungary comprise liberalization of foreign trade and investment flows, introduction of social safety net, the tax and banking systems, and labor market policies. The Hungarian and Polish experience with price reform starting in early 1980s shows a sustained upward shift in the price level. In Hungary and Poland price level effects have been followed by persistent inflation. In Poland, 18 months after the start of stabilization, the price level was 5 times higher, output and real wages 40% lower and unemployment was at 10%.
