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International Monetary Fund. External Relations Dept.

issue tax offsets that are passed on not only to the firm but also to firms that have claims on the state’s supplies. These network effects mean that nonmonetary transactions can become pervasive and involve both viable and nonviable enterprises. IMF S urvey: Noncash transactions have not increased in all transition economies. Why have they in Russia? M umssen: Our study addresses two questions. First, why have barter and offsets been so pervasive in Russia, Ukraine, and a few countries of the Commonwealth of Independent States? Second, why did barter and

Mr. Daniel Daianu and Donald J. Mathieson

is “programming” the dynamic of explicit subsidies when there is a time horizon covering the period of restructuring, or of liquidation of various enterprises. This issue is closely connected with reducing strain within the system by a gradual phasing out of nonviable enterprises. c. Incomes control policy The control of incomes (wages) is vital in order to be able to control inflation and, thereby, to maintain real balances at a level that reduces the propensity of enterprises to run arrears. 2/ How to attain it? Technically, in addition to

Mr. Daniel Daianu
The paper considers that strain is the main source of inter-enterprise arrears in post-command economies. Strain can be linked with the structure of the economy and the size of resource misallocation. Inter-enterprise arrears “soften” markets and operate as a self-protecting device against the pressure for change. As temporary quasi-inside money, arrears fuel inflation. A paradox of policy credibility in undertaking structural adjustment is emphasized. Rising exports can be a possible side effect of arrears and a constraining factor: the size of the economy is seen as affecting the relationship between arrears and exports. An operational framework for containing arrears would Include: “breaking up” structure; Imposing a disciplining “straitjacket” on structure; industrial policy (“picking losers among losers”) and targeted external assistance. Containing arrears can not be a one shot policy-drive; here one deals with a process that will overlap in time with the evolving environment.
Mr. Eduardo Borensztein
This paper analyzes some of the lessons that can be drawn from the experience of Eastern Europe in the process of transition to a market economy that is under way, and examines some key challenges currently facing policymakers in these economies. The paper studies the constraints affecting the general strategy of reform--rapid versus gradual--that was adopted, and the output decline initially experienced and its effect on medium-term growth perspectives. The paper also discusses the implementation of mass privatization schemes, and the type and extent of government intervention in the restructuring process. This is a Paper on Policy Analysis and Assessment and the author(s) would welcome any comments on the present text. Citations should refer to a Paper on Policy Analysis and Assessment of the International Monetary Fund, mentioning the authors) and the date of issuance. The views expressed are those of the author(s) and do not necessarily represent those of the Fund.