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Supply and demand factors in the output decline in East and Central Europe

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Abstract

What are the relative weights of supply and demand factors in generating the output declines observed in Poland during its transition to the market? And how important are the factors that fit under the rubric of “supply and demand” in comparison to other potential reasons for the output decline, especially adjustment away from the Soviet-style economic system? The initial decline seems to have been due to a combination of aggregate demand shocks associated with the stabilization, declines in inventory investment due to the transition from a shortage economy, and especially shifts in demand away from socialized sector industry towards other sectors of the economy. Growth has come primarily from expansion in new sectors, such as services and residential construction, and in new enterprises. The applicability of one-good macroeconomics is limited in understanding either the output decline or the subsequent growth in Poland.

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Authors and Affiliations

  1. International Monetary Fund, Washington, D.C., U.S.A.

    Andrew Berg

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  1. Andrew Berg
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This paper was originally presented at the IIASA conference “Output Decline in Eastern Europe-Prospects for Recovery”, Laxenburg, Austria, November 18–20, 1993. I would like to thank Marek Dabrowski and conference participants for useful remarks. The views expressed in this paper are not necessarily the views of the International Monetary Fund.

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Berg, A. Supply and demand factors in the output decline in East and Central Europe. Empirica 21, 3–36 (1994). https://doi.org/10.1007/BF01383970

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