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Foreign Economic Liberalization in Eastern Europe

  • Paul J. J. Welfens
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Abstract

Traditionally, socialist economies in the CMEA were isolated from Western world markets. State foreign trade organizations handled the bilaterally fixed intra-CMEA trade and were responsible for trade with capitalist countries which was frequently conducted via barter trade agreements. Production was based on monopolistic intra-CMEA specialization which was further distorted by political considerations dominated by Soviet interests. This did not rule out that the USSR implicitly subsidized the smaller CMEA countries via natural resource exports that were underpriced relative to the world market. Divergences between export prices within the CMEA and domestic prices were characteristic for all CMEA countries. With inconvertible currencies, sustaining shortages in the official economy and a thriving shadow economy, black market exchange rates were well above official exchange rates, and currency substitution plagued most CMEA countries.

Keywords

Foreign Direct Investment Foreign Investor Real Exchange Rate Real Interest Rate Trade Liberalization 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.

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Copyright information

© Springer-Verlag Berlin Heidelberg 1992

Authors and Affiliations

  • Paul J. J. Welfens
    • 1
  1. 1.Department of EconomicsUniversity of MünsterMünsterGermany

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