A Macro Model of Queuing and Resale in a Transition Economy

Abstract

This paper constructs a two-period macroeconomic model to analyze the implications of anticipated market reforms for the economic performance of a centrally planned economy (CPE). In the first period an excess demand for goods develops at prices set by central planners, forcing consumers either to queue to obtain goods from state retailers or to purchase goods on the black market. In the second period a competitive market economy prevails. The model is used to study issues such as the role of foreign aid and the likely impact of domestic monetary and fiscal reforms.