Macroeconomic Policy and Institutions in the Czechoslovak Transition: The Starting Point and First Steps
The purpose of this chapter is to examine the institutional background of recent developments in Czechoslovakia and to suggest the design of future changes. The attempt of Czechoslovak reformers is to realize a rapid transition to a market economy. On the way to the market, though, several obstacles must be overcome.
One is usually interested in what is to be transformed, the timing of the process, and so forth. However, serious misunderstandings can evolve if the background of the previous institutional arrangements and macroeconomic performance is not understood. Such a description will be contained in the first part of this chapter, with special attention to the macroeconomic dimensions of a closed economy. The second part will address institutional changes and institutional prerequisites of a new macroeconomic policy. The third part is concerned with specific problems concerning monetary and fiscal policy in the transition.
It is not surprising that the monetary and fiscal systems of communist countries differ fundamentally from the corresponding arrangements in the West. What is usually referred to as the standard command system, including the basic communist concepts regarding the role of banks in the economy, first took shape in the Soviet Union during the early 1930s and then was introduced into the other eastern bloc countries when they came