Price liberalization, monetary, and fiscal policies for transition economies: a Post Keynesian perspective

Abstract

Post Keynesian economic analysis recommended a different reform program for transition economies than the orthodox model in the form of shock therapy implemented and imposed by the Washington consensus. In contrast to the dominant view, Post Keynesians recommended gradual price liberalization, which involved maintaining fixed prices and wages and subsidies, the establishment and maintenance of buffer stocks, government intervention to stimulate investment and incomes, and industry-incomes policies. With regard to monetary policy, Post Keynesians argued that a discretionary monetary policy was essential to reduce unemployment. With respect to fiscal policy, budget deficits were essential to maintain full employment.

Keywords:

• MONETARY AND FISCAL POLICIES
• PRICE LIBERALIZATION
• TRANSITION ECONOMIES