Comments on: External Liberalization in a Large Country: The Contribution to the Transition Process in Russia

Abstract

Looking at the catalogue of reforms for the transition of an economic system from a centrally-planned economy to a market economy, there is widespread consensus among economists as to the necessary prerequisites: the opening of the economy to foreign competition, as well as substantial trade reforms after many years of import substitution and total regulation of foreign trade. Whether such trade reform should be implemented parallel to a fiscal and monetary stabilization, or only subsequent to stabilization, is largely disputed (BUCH/FUNKE/HEINRICH/RAISER, 1994, p.20). In view of the empirical experience from developing countries, simultaneous stabilization and trade liberalization seem to be recommendable. Delaying of trade liberalization would perpetuate the inefficiency cost of large divergences between domestic and international prices. Moreover, enterprises would not be forced to restructure and thus readjust to the need of an increasing efficiency.