CMEA Economies - Models and Forecasts Based on IES Systems

A C T A U N I V E R S I T A T I S L O D Z I E N S I S _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ FOLIA OEC ONOM ICA 91, 1989

Jan B. Gajda*, Paweł Tomczyk»

• CMEA ECONOMI ES - MODELS ANO FOR ECAS TS BASEO ON IES SYSTEMS**

1. Int roduction

Entire series of systems of m o d e l s 1 of the seven E u r opea n m e m bers of CMEA (Bulgaria, Czechos lovak ia, GOR, Hungary, Poland, R o m a -nia and Soviet Union) was based on the a s s u m p t i o n that the similari-ties in the ecp nomi c systems, trends in hi a t o r i c developments, g e o grap hic location, etc. allow for sim ilar s p e c i f i c a t i o n of e q u a -tions of the country models, while special, Individual features of some economi es induce m o d i f i c a t i o n s of the pro t o t y p e model e q u a -tions ( G a j d a w > .

The sys tem con sist s of two subsystems. The first one con tain s models of national economies, the sec ond one - submodel of foreign trade und e r s t o o d as the mai n link be t w e e n the nat iona l models. In the p r o t o t y p e version, links b et ween n a t iona l mod e l s are of very limited scope, as the m a i n stress is put on the i n t e r c o nnect ions be t w e e n the main eco nomi c variables of a country and the impact of

•Or., Lecturers in the Institute of E c o n o m e t r i c s and S t a tist ics U n i vers ity of Łódź.

**An earlier v e r sion has been p r e s e n t e d to the V W o r ld Con gres s of E c o nome tric Society; see G a j d a , T o m c z y k [б]. The first a u t h o r ’s c o n t r i b u t i o n covers p r e d o m i n a n t l y model s p e c i f i c a -tion, while the second a u t h o r ’s - the forecasts.

1 On various stages of res earc h and model b u i ldin g the follow« ing m e m bers of the re s e a r c h team made their increments: A. B. C z y -żewski, J. B. Gajda, E. G ó r s k a - H a ł a d a j , G. Juszczak, W. Juszczak, 0. Miszczyrtska, M. Pot argowicż, J. J. Szt audynger, P. Tom czyk as well as students: 0. K a ź m i e r c z a k , Z. Łęczycka, M. Porczyrtska, The gen eral s u p e r v i s i o n of prof. W. Welfe is g r a tefu lly ack nowledged.

► S/fP*SSP:iP ►«PsMrPH -, 4> S P = E P -M P --- ^ > S 5 P = S P * S 5 P ( - J ) j J J/X- ' < ^ 5 . I Ч i 9 i ,**--- »JMsjrP---1--- > 2P--- ►y»2P*om:PX--- ~t±£3~ I , \ - - - ---- - - — * 4 - ' Д С "

_J

Fig. 1. S c h e mat ic r e p r e s e n t a t i o n of b a s ic r e l a t i o n s h i p s in p r o t o t y p e model of CME A economy - - - > n o n l a g g e d ; -- > or <— «> j l a g g e d influence; e x o g e n o u s v a r i a b l e s - small l e t ters (j/x, peh, ehs, mm/m

for eign trade and esp e c i a l l y debt bu r d e n on the dom e s t i c activity. Only then the sub mode l of foreign trade enters, with its s e p a r a -tion of the int ra-C MEA trąde from the trade with the rest of the world.

The largest sys tems - IES2 and IESA are the most d i s a g g r e g a t e d ones, wit h for e i g n trade div ided into four g ro ups of commodities: fuels and mineral raw m a t e ria ls (roughly equ i v a l e n t to gro ups 2 and 3), m a c h i n e r y and tra nsport e q u i p m e n t ( i n vest ment goods, close to SITC7), food and org anic raw m a t e ria ls (close to SITCO * 1 + ♦ A and some of 2 (oils, fats), and other (mostly con sume r)goo ds. The foreign trade flows are further d i s a g g r e g a t e d into two d i r e c -tions - the int ra-C MEA trade and the trade wi t h the rest of the world, and exp re s s e d in both - cur rent as well as con s t a n t prices, in US dollars. The national eco nomy is d i s a g g r e g a t e d into five p r o d u c t i o n sectors: m a n u f a c t u r i n g and mining, c o n stru ction , tr a n -s p o rtat ion, agr iculture, d o m esti c trade and the rest; wit h the f o l l owi ng e n d ogen ous variables: gross investment, capital stock, net mat eria l p r o duct (roughly equ i v a l e n t to the net dom e s t i c p r o -duct of SNA s t a t i s t i c s wit h ser v i c e s excluded). In some v ar iant s s ub mode l of e m p l o y m e n t is incorporated.

The s ys tem is cl o s e d by the e q u a t i o n s e x p l a i n i n g con sump tion, not mat erie l p r o duct (national income) dis trib uted, net and i n v e n -tory inv estment and n a t iona l income deflator.

The general s t r u ctu re of r e l a t i o n s h i p s of the p r o t o t y p e model is d e m o n s t r a t e d on the Fig ure 1 (sy mbol s have been d e s c r i b e d in A p p e n d i x ).

2. Theses

(i) We ass ume that the m a i n i t a r g e t of the c e n t r a l l y p l a n n e d ec o nomy is to o b t a i n d pos s i b l y hig h e s t output, as to fulfil m a x i mally the needs of society. Usualy the w e l f a r e inc reas e is u n d e r -s t o od a-s the pr o p e r target of CP -society. The m e a -s u r e m e n t pro b l e m -s for ced the s u b s t i t u t i o n of w e l f a r e by out pgt as the o p e r a t i v e target. This brings, h ow ever , some d e l i c a t e c h a n g e h a v i n g p ow erfu l p o t e n t i a l Impact. One may be tem pted to m a x i m i z e o ut put of i n v e s t -ment goods as it w o u l d lead to fur ther e x p a n s i o n of c a p a c i t i e s and

taster fur ther growth, tem p t a t i o n q u i t e n a t u r a l for • c o u n t r i e s s ev erel y d e s t r o y e d in the last war. T he re are r i s ks a s s o c i a t e d with this approach. First is the ris k of s t a g n a t i o n or ev e n de-, c re ase of the na t i o n w e a l t h as m e a s u r e d by, say, c o n s u m p t i o n per capita. In lon ger run o ne can ex p e c t the s e l f c o r r e c t i v e m e c h a -nisms to revert the sit uation, as lack of I n c r e a s e of c o n s u m p t i o n tends te d e o r e a s e - l a b o u r m o t i v a t i o n and I n c r e a s e s social tensions. The other is the risk of "o v e r h e a t i n g " - the e c o n o m y may not be able to a s s i m i l a t e p r o p e r l y the new cap aci t i e s , or - s o m e t i m e s - even to finish the Inv estm ent p r o j e c t s a l r e a d y started. Thus we have net waste of some of the goods p r o d u c e d and f ro zen in the u n f i n i s h e d pro jects. Thus, part of the ou t p u t doe s not inc reme nt to the gro wth of wealth, rather the rev erse is true since the im-p or ted inim-put as well as the labour inim-put mu s t be im-p ay ed inc r e a s i n g the tensions at d o m e s t i c ma r k e t and for eign debt burden. Ne v e r - theless the output of the eco nomy g r o w s at hi g h rate, formally.

(ii) Ano t h e r b a s ic a s s u m p t i o n says that the cen tral pla n n e r has only a limited i n f l uen ce at the co u r s e of e c o n o m i c p r o c e s s e s of his own country. We shall str ess the ’ d i f f e r e n c e b e t w e e n the cen tral p l a n n e r and the a d m i n i s t r a t i o n - the first one sets t ar-gets, in the for m of pla n to be ful fill ed, the se c o n d one is r e s -p o n s i b l e f o r o -p e r a t i v e d e c i s i o n s lea d i n g to the r e a l i z a t i o n of the plan; in p r a c t i c e a£ C M E A s the -two fun ct i o n s us e d to be m i x e d together. The i n f l u e n c e o f the p l a n n e r is o b v i o u s l y mo r e l i m ited at the short d i s t a n c e (w'hen the su p p l y r e s t r i c t i o n s are tight) than at the long run; ev e n in the last case.

(ill) The e l e m e n t s best c o n t r o l l a b l e by the p l a n n e r s se e m to be a s s o c i a t e d wi t h d e c i s i o n s about i n v estm ent, w a g e s and prices. However, some inv e s t m e n t d e c i s i o n s are forced ove r the p l a n n e r by the r e q u i r e m e n t due to the n e c e s s i t y to c o n t i n u e u n f i n i s h e d inves t m e n t pro j e c t s in the past; wa g e con t r o l is lim i t e d to w a g e i n cre ase and/or wag e s t r u c t u r e d e c i s i o n s as it is e x t r e m e l y u n p o -pul ar to dec r e a s e wages. The i nc reas e of p r i c e s is u n p o p u l a r , t o o , but can be rea l i z e d easier.

The central b a l a n c i n g and d i s t r i b u t i o n of c r u c i a l raw m a -terials and m a n u f a c t u r e d goods seems to be the last of the jnost pow e r f u l tools of the p l a n n e r ' s inf luqpce. To be ma d e p r o p e r l y - this d i s t r i b u t i o n req u i r e s p e r f e c t k n o w l e d g e of the e x i s t i n g n e e ds and p o s s i b l e gains, what res tr i c t s s e r i o u s l y the e f f i c i e n c y of such a tool.

(iv) Virtually all plans assume some mea s u r e s toward eff icie nt use of resources. In p r a ctic e it seems to be easier to set and ach ieve growth goals through such ext ensi ve mea s u r e s „as the i n -cre ase of c a p acit ies through investment, than through o r g a n i z a t i o n con d i t i o n s sti mul a t i n g technical and org a n i z a t i o n a l progress, r e -sul ting in mor e eff ic i e n t use of already e x i s t i n g cap a c i t i e s and resources. It is thus assumed in the model that the main source of gro wth is formed by inv estment activity.

(v) C u r r ent ly one may safely assume that the labour force is (at least formally) fully e mp loye d in CMEAs (as a result many s i m u l a t i o n s are made with e m p loym ent set e x o g e n o u s l y acc or d i n g to the gr o w t h of labour force; the e m p l o y m e n t submode l use d to Ьё a c t i v a t e d only for special analysis, structural analysis). The as s u r a n c e of job is one of the best p r o n o u n c e d a t t r i b u t e s of c e n -trally p l a n n e d econumies. Soc i a l l y hig hly fav oura ble - it may pose p r o b l e m s wit h eff ic i e n t use of the labour force, as it h a p p e n s to relax the w o r king discipl ine. We do not ana lyze this p r o b l e m any f u r t h e r .

(vi) Orte of the very important a s s u m p t i o n s is that the imports serve mos tly the needs of the p r o d u c t i o n p r o c e s s . w h i l e the exp orts oarn money for imports. The cha nces that the e x c hang e is b a s ed on cal c u l u s of eff i c i e n c y and c o m p a r a t i v e costs are thus ser ious ly limited. There exist at least two mai n reasons for it. First

-I

a tt empt s to defeat c e n t ral ly p l a n n e d e c o n omi es in eco n o m i c "cold war", res t r i c t i o n s and e mb argo s f r e quen tly i n t rodu ced by the West and hence the risk of being cut short of some imp ortant c o m m o d i -ties forces C M E As to pu r s u e c au tiou s e x p o r t - i m p o r t policy wit h r e s u l t i n g aut arch ic tendencies. The other reason res ults from p e t r i f i c a t i o n of the pol icy of fast i n d u s t r i a l i z a t i o n rea l i z e d after int r o d u c t i o n of central pla n n i n g in the p o s t - w a r per iod (he avil y d e s t r o y e d e c o n omi es had to buy inv estm ent goods abroad, and the central control over scarce amount of for eign cur renc y a v a i l a b l e e nh ance d the ach ie v e m e n t of such crucial goals as e c o n o -mic rec over y and expansion).

A d d i tio nal h i n d r a n c e is posed by the sys tem of dom e s t i c prices, b e i n g insulated from the world ones. The str uc t u r e of d o -m e s t i c prices as well as their level only re-motely reflect either costs or uti lity of goods ava il a b l e on the mar ket - so r e m otel y that it is hard to com pare them even b e t w e e n two c e n t r a l l y p l a n n e d eco nomies. This obv io u s l y inf luences h e a vily the pro per c al cula

-tion of e f f icie ncy of the foreign e xc hang e o b s c u r i n g the gains from the international d iv isio n of labour.

(vii) Thus, basically, import brings fuels, raw mat er i a l s and investment goods. The import of c o n sume r goods has m o s t l y c o m -p l e m e n t a r y c h a r act er and is likely to be act ivat ed when a s-pecial i n t e r ve ntion on the market is necessary. Those are the reasons for importe of c on sume r goods to be include d into the c o n s u m p t i o n function, while imports of inv estment goods enters i n v estm ent func-^ tion, imports of raw mat er i a l s and fuels - pro d u c t i o n function.

(viii) In the mo d e l s of the CP economies, export e q u a tio ns are f re quently dem and det e r m i n e d with, say, world exp orts ser ving as a proxy for world demand. Thi3 r ef lect s the h y p othe sis that due u n s u f f i c i e n t quality, the CMEA pro d u c t s are pre sent on the world m a r k e d in r el ativ e abundance. However, it is clear that as the e c o n o m y grows, the amount of high qua lity goods o f f ered for export inc reases even if the share of such goods in total p r o d u c t i o n does not increase. Our export equ atio ns are supply dri ven ones, with w o r ld exp orts ser ving as a shift variable, a m o d i f i c a t o r of supply rea li z a t i o n function. Ano ther m o d i f i c a t i o n of supply is a ch ieve d by the p re ssur e of a d m i n i s t r a t i o n - we assume that the higher d e b t / e x p o r t ratio, the higher the p r e ssúr e of a d m i n i s t r a t i o n is, to force p r o d u c t i o n of goods for exp o r t s and, sim ulta neous ly, to r e d u c e the imports of goods. Hence in bot h - export and import

о e q u a t i o n s we put a m e a s u r e of the debt pre s s u r e .

(ix) For the int ra-CMEA «trade we assume that each country trades wit h all the reet,of the CME A as a whole (Figure 2). This "c o m m o n - p o o l " con cept o bs cure s s o m ewha t the d o m i n a t i n g role of the Soviet U ni on and in m o r e d e t a i l e d mo d e l s of foreign e x c h a n g e - i s som et i m e s m o d i f i e d as tq account for the latter (see d i s c u s s i o n in T o m c z y k [8]).

(x) Whe n d i s a g g r e g a t i n g the for eign trade we assume that the CMEA ma r k e t for raw m a t e r i a l s and fuels is supply driven, as these

In 1977/1978 no data of foreign debt of the CMEA was availa-ble, thus we i n t rodu ced the a c c u m u l a t e d for eign trade b a l a n c e as

a proxy for the debt (observe that it ha3 n eg a t i v e sign w he neve r the debt i3 positive). When debt e s t i m a t e s bec ame ava il a b l e the a c c u m u l a t e d for eign trade b a l ance was found to have e x p l a n a t o r y power (as m e a s u r e d by the d e t e r m i n a t i o n coe ffic ient, s i g n i f i c a n c e of e s t i m a t e s or c o r r e c t n e s s of their signs) hig her than the debt e s t i m a t e s .

Г 1 --- --- ----0 £ S 8 O L G N 0 0 0 F 1 1 <-\--CZECHOSLOVAKIA-- -» 1 •*-[ - ---* 1

i

F

S

!

Fig. 2. Fo r e i g n exc h a n g e sch ema of CME A c o u n t r i e s in IES s y s tem

g oods see m to be easy to sell at the n o n - C M E A ma r k e t s as well. The o p p o s i t e is a ss umed for the CMEA m a r k e t of i n v e stm ent and c o n s u m e r goods. The fact that after the s ec ond w or ld war C M E A s have d e v e l o -ped e c o n o m i e s with sim i l a r s t r u c t u r e s ( e s peci ally the sm a l l e r six E u r o p e a n CMEAs) inc reases sup ply of p r o d u c t s of the last two g ro ups of goods, fre quen tly of q ua lity c o m p a r a b l e w i t h i n the CMEA, but lower than q ua lity of the same goods o f f e r e d at the world m ar ket (es p e c i a l l y by the fast d e v e l o p i n g c o u n t r i e s of, say, P a -c i f i-c B asin) , where the dire-ct inf luen -ce of w o r l d m a r k e t pri ces matle the c o m p e t i t i o n very t h o u g h 5

3. P r o t o t y p e Model

Below, we p re sent a short review of the p r o t o t y p e model (see A p p endi x for the list of basic sym bols). The b a s ic s t r u c t u r e shown refers to the u n i s e c t o r a l min imod el. It s e r v e s as well as the b a s ic for the s p e c i f i c a t i o n of e q u a t i o n s of d i s a g g r e g a t e d models.

P R O D U C T I O N X (net out put) is e x p l a i n e d by the c l a s s i c a l two- - fa ctor p r o d u c t i o n fun c t i o n m o d i f i e d a d d i t i o n a l l y by the import r e s t r i c t i o n s :

Actually, s o m e t i m e s "lower q u a l i t y " m e a n s at the w o r ld market "Made in CMEA", due to p o l i tic al r at her than e c o n o m i c or true q u a -lity factors, tar riff s and b a r r i e r s r e s t r i c t i n g imports from CMEAs.

+ + + +

X * f(KM, nm, MF, T), where MF = M x mf/m

or as pro d u c t i v i t y function

■f + ł

X/N = f (K/N, (MF/N + MF/N(-1>:2, T)

where K/N * KH : nm, MF/ N = MF : nm, and we иэе two per iod mov ing ave rage of the last v ar iabl e to cancel out some of the

short-д -term flu ctua tions buf f e r e d by stocks .

INVESTMENT JM (in p r o d u c t i o n sphere, gross) is e x p l a i n e d b a s i c a l l y by factors d e t e r m i n i n g supply: gro wing p o s s i b i l i t i e s of the eco nomy to invest (X rep rese nts the po s s i b i l i t i e s as well as the inc reas ing supply of inv estment goods), MM - supply of i m p o r t e d inv estm ent goods (this v a r iabl e rep rese nts import r e s t r i c -tions hav ing form of the t e c h n o l o g y - i m p o r t - b o t t l e n e c k ; c h a nges of e x o g e n o u s l y set share mm / m of imported inv estment goods in total imports make the bot tlen eck wider or narrower; on the other hand, r e d u c t i o n of total imports due to debt burden may bring another bo t t l e n e c k t y p e impact), j/x is the pla n n e r influence proxy, d e -fined as inv estment intensity rate (see G a j d a [2] for d i s -cussion)

♦ + ■*■ +

JM = f (X-, MM, j/x, JM(-l), where MM = M x mm/m.

The p r e s e n c e of lagged JM. o bs cure s s om ewha t the supply o r i e n t a -tion of the equa-tion, this is, however, und e r s t o o d as a v ar iabl e shi f t i n g the supply r e a l i z a t i o n function, the shift being due to'

the inv estment pro j e c t sta rted in the past.

FIXED ASS ETS KM (in p r o d u c t i o n sphere) follow the sta n d a r d identity

K M * KM(-l) ♦ 1M - d

This s u p p l y - d r i v e n d e s c r i p t i o n is in acc o r d a n c e wit h our a s s u m p t i o n 1 about the target of the c e n t r a l l y pla n n e d economy, in w h i ch there is no nee d to bother about dem and b e i ng too small; as the pr o f i t m a x i m i z a t i o n is not the d r i v i n g force of the eco nomy there alw ays ex i s t s a p o s s i b i l i t y to exp and d em and by simple r e -d u c t i o n of prices. Six ties an-d s e v e n t i e s gave e xa mple s of such r e d u c t i o n s .

s ta t i n g that the cur rent value of fixed assets equals the past value, exp a n d e d by IM*- material eff ects of i n v estm ent exp end i t u r e ha v i n g the form of new assets e n t erin g the product ion, and reduced by the amount of assets d e p r e c i a t i o n d due to capital use in p r o -duction. Data lim ita t i o n s forced us to r es trai n to some sto chastic p r o x y :

ł ♦ "f

KM * f(JM, JMt-l), JM(-2), ...,) ♦ (1 - r) x KM(-l)

where we assumed the d e p r e c i a t i o n being p r o p o r t i o n a l to the amount of fixed assets at the end of last p er iod (r the d e p r e c i a t i o n rate), and the new fixed assets beinfi a d i s t r i b u t e d lag of the c u r r e n t and past i n v e stm ent e x p e n d i t u r e s 5 .

W A G ES ZP (nominal, in p r o d u c t i o n sphere) g e n e r a l l y de p e n d on the labour p r o d u c t i v i t y X/N, reveal their own ine r t i o n (re flec ted by the lagged value of ZP), and react to the inv estm ent share in the nat iona l income

+ ♦ +

ZP = f ( X / N , 3 / X D , Z(-l)) .

As there is bas ic a l l y full e m p l oym ent in the per iods of i n v e s t ment e x p a n s i o n there must act some other m e c h a n i s m s b r i n g i n g a d -dit iona l labour force to the heavy industry and building; these are ass u m e d to hav e the form of a t t r a c t i v e w ag es o f f ered there, the wag e inertia r e f l e c t i n g the p r o cess of non-investment i n d ustr ies s t r e s s i n g aft e r w a r d s to close the gap in wages.

PERSONA L INCOME Y (real) dep ends on nom inal wages 7.P .em ploy-ment nm and persona l income d e f lato r PY (or a l t e r n a t i v e l y n a t i o nal income d ef lato r PX, wha t e v e r is ava ilable). Due to data l i -mi t a t i o n s we ch o o s e a proxy v ar iabl e d e f i n e d as follows:

Y = ZP * n m : PY.

PRICE DEF L A T O R (say PX) dep ends on for eign trade (and its pri ces) pressurp, as m e a s u r e d by the c u r rent foreign trade b a l ance

5 In e x t reme cases the equ a t i o n has the f o l l o w i n g form: KM = * a Q + a ; x (0.167 x JM + 0 . 0 . 3 3 3 x ( J M ( - l ) 4 j M ( - 2 ) ) + 0 . 1 67 *3M( -3))+ + (1 - 0.04) x KM, w he re we were forced to assuqie a pri ori values of c o e ffic ients , due to e x t r e m e l y s m o o t h time series of JM and m u l t i c o l l i n e a r i t y pro blems; also some data on JM and KM are not d i -rectly compati ble, thus the e q u a t i o n has r e c o n c i l l i a t o r y c h a r a c t e r as we s o m e t i m e s get the est i m a t e of a^ gre a t e r than one.

(so metimes the debt proxy - the a c c u m u l a t e d bal ance - was assumed) per unit of d om esti c net output (EP - MP) : X, the ratio of income to net output Y :X , sit uati on in a g r i c u l t u r e (me asured by the wea t h e r index IOWA, ass umin g 100 for normal years, exc ee d i n g it

in years with good crops, and the reverse whe n crops are bad):

+ + - +

PX » f (ЕР - M P ):X , Y : X, IOWA, PX (-1)).

The equation suggests price decrease when the balance is positive hence some mod ific ation of (EP - HP) : X seems necessary to cover the problem; as all CMEAs have negative accumulated foreign trade balance the variant with this variable works (locally) better.'

Thus the main forces bringing inflation into the CMEAs are identified as the world inflation, the foreign trade debt (and resulting need for import reduction) and disprop ortio n between domestic output and incomes.

The main problem arises from the fact that inflation in CMEAs has different character than in m a r k et type economies with n o n r e -gulated prices. As the prices are basically con trolled and changed by a central dec ision - the CMEA equ ivalent of n on -ste p-wis e price increase typical for the market economy, has the form of supply shortage and hidden tensions. This cannot be easily reflected in the equation like the one quoted above. This part of the prototype model especially needs further elaboration^.

CON SUMP TION С (real) has, sim ilarity to the p r o duct ion fun ction, classicąl form with lagged con sump tion and income as e x -planato ry variables, mod ifie d by the imports of consumer goods MC:

♦ + ■ ¥

C = f(C(-l), Y, MC), where MC = M x mc/m

or in more supply ori ente d version - with Y substit uted by X. However, we do not assume that supply of consumer goods is u n l i m i -ted and thu3 the personal income determi nes the consumption. In our specifi catio n real income is supposed to be adjusted a p p r o

-6 A very interesting concept based on the velocity of money cir cula tion was suggested in a private convers ation by prof. W i l -helm Krelle, director Bon n-IIASA Res earch Group. Further results may be exp ected from this group research.

p ri ately by the price mov ement before it enters the market. This seems to become the case of last years, at least in Hungary or P o

land. Nevertheless the above specifi catio n ' seems a bit too n o r -mative, still.

To evaluate the discrepancy UD between the national income pro duced X (net output) and dis trib uted XD we need the acc u m u l a -tion item AC equal to net investment and inventory investment (the con sump tion from social funds distant cousin of government c o n -sumption in mar ket- type economy models, is included into C).

•f - ♦

AC * f (JM, E - M, X)

The equ a t i o n has aux iliary character, the gross inv estment JM is s up pose d to deliver the mai n body of acc umul ation , the E - M term reflects the change in invento ries due to excess of exp orts or i m -ports, and the last term X ref lect s the increase in invento ries as the net output inc reases (the i nv ento ries serve here as the p r o d u c t i o n / c i r c u l a t i o n buffer).

D I S C R E P A N C Y UD • X - XO reflect s in most general terms the gross imbalance of the economy. Ass u m e d to reflect the need for extra imports (see G a j d a [2] , G a j d a et al. [5] for d i s -cussion), it enters the e qu atio n of imports, c l o s i n g thus the main loop of the cou n t r y model.

E X P ORTS E (in con s t a n t prices) a :o d e s c r i b e d by the identity E = EP : PE.

E X P ORTS EP (in c u r rent prices) are e x p l a i n e d by the general s upply of goods, r e p r e s e n t e d by net out put X and two shift v a r i a -bles, one (OEHSP) - first d i f f e r e n c e of w or ld e x p orts in cur rent prices, ref l e c t i n g s hi fts in supply r e a l i z a t i o n due to the cha nges in the w o r ld a ct ivit y and the se c o n d one (SSP:EP) - debt (proxy) per unit of export, ref l e c t i n g shi fts due to extra a c t ivit y of a d m i n is trati on, o r i e n t e d on exp ort e x p a n s i o n in c a s es of high d e b t :

♦ ♦

(as SSP is negative when debt is possitive, the sign of S/EP is negative).

IMPORTS M (in constant prices) are explained by the production process requirements represented by a gross variable - net output X (in dis aggregated versions the gross investment e n t e r s ,r e s p e c t i -vely) the same as in export equation shift variable rep resenting the pre ssure of adm inistration to reduce imports as debt grows, and the gross imbalance variable UO (it is assumed that the ini-tial difference between X and XD was larger, it was, however, partialy filled up with increased imports; since the authorities as well as the foreign trade companies that have the foreign trade monopoly react with delay and "resistance", only a part of the d if ference was filled up, the ratio of the two parts assumed s t a b l e ) .

♦ ♦

M г f (X , S / E P ( - 1), UO)

(as SSP is n eg ativ e whe n the debt is positive, the sign of SSP/EP is positive).

IMPORTS MP (in cur r e n t prices) are d e f ined by the identity: MP = M x PM.

O L F L A T O R S PE and PM of for e i g n trade are linked to the world p r i c e s wit h some inertia:

+ ♦ + ♦

PE = f (PEHS, PE(-l) and PM = f (PEHS, PM(-l)).

As the d e f l ato rs reflect the price g e n e r a t i n g p r o cess of the int ra-C MEA exchange, too, where pr i c e s are formed on the basis of m o v i n g ave rage of the last 3-5 years, the inertia e l e m e n t i n -t ro duce d by lagged e n d o g e n o u s v ar iabl e is rel ated to the Koyck distribute, lag. Mor e a dv ance d s p e c i f i c a t i o n takes indices of w o r ld p ri ces for the four c o m m o d i t y gro ups (PF, PM, PR and PC)

instead of the sin gle index P E H S 7 .

7 It is int er e s t i n g to find in the e s t i m a t i o n that the i n -t ro d u c -t i o n of -these four indices ma k e -the lagged e n d o g e n o u s

varia-4. O i s a g g r e g a ted_Modej[

As we mentioned in the paragraph 3 the equations of the country models preserved basically their s p e cifi catio n, in d i

-sag greg ated model. The main dif ference is in the functions d e s -cribing the output^ of transportati on,do mest ic trade and the other, where the explained variables are linked to the net output of man ufac turin g and mining, building and agriculture rather than describ ed directly by product ion function, the import of i n v e s t -ment equations for agriculture and the above m en tion ed sectors, also investment intensity dis appe ared from some investment e q u a

-tions. ,

The most important changes were introduced in foreign trade sector, since the trade was described in d i s aggr egati on into two dir ections - CMEA and the rest of the world, and into four groups.

Describing the functioning of the CMEA market one has to take into account the crucial factor men t i o n e d above: the levels as well as structure of prices on the intraCMEA market differ s i g n i -ficantly from those of the world market. The most striking example is oil. Until mid seve nties its price (set by the Soviet Union as the main supplier of oil to Poland, and almost exclusi ve supplier to Czechoslovakia, GOR and Bulgaria) was kept at the level of last five-years world average, later moving average was taken instead. As a result, in late seventies the price was app roximately some 30* below the world price, while in 1984 it was a b o v e it,as the latter decreas ed sig nificantly in the eighties.

ble absolute (as judged by d et ermi natio n coe ffic ient or s i g n i f i -cance test). Does it mean that the prices charged in intra-CMEA trade, although different in level from the world ones, tend to reflect the most current changes in the world prices and thus imitate the dynamics of the latter? Another int eres ting o b s e r v a -tion made on aggregate level (i.e. when PEHS was used) was that the a u t oreg ressi on coeffic ient of export equ ation was for all seven CMEAs smaller than the same coe ffic ient in import equ ation of the same country. The institutions exc erci sing mon opoly of foreign trade seem not to be able to make full adv antages of an increase of world prices (and r es pect ively increuse prices for their exports), while suppliers of CMEA imports demand the new pri ces much more succesfully. One ha3 to keep in mind that at least half of the exc hange is made inside CMEA market, where prices are much more stable.

Another factor strongly influencing the intra-CMEA exchange results from unchangeability oS CMEAs currencies and their i so la-tion from the world prices. The structure of prices was different in different countries, system of direct or indirect subsidies were different as well. Hence, direct comparison of costs of e x -changed goods was extremely difficult, with resulting tendence to

b a l a n c e b i l a t e r a l e x c h a n g e within each of the four about mentioned groups (i.e. raw materials and fuels for raw materials and fuels, etc.) the strongest was this ten den-cy in exchange within the six smaller CMEAs and for the two deficit grodps - agricultural and fuels and raw m a t e r i a l s . As multi-lateral accounting was never implemented on full scale - the excess of exports in some bilateral trade actually meant giving credit with unusually low interest rate (in the seventies 2% was not an usual rate).

Finally, the debt accumulated in the seventies, started to in-fluence the exchange in early eighties. In the seventies, when the pos t-oil-shock recession stagnated the western economies, the credits were readily given to CMEAs. As they were realized in the form of imports from the West they expanded the demand at o t h e r wise strinking international market considerably softening the r e -cession effects. The debt repayment schedule was strongly influenced by the hardening conditions of exports to the We3t, r e -sulting from the recession, and unusually high interest rate in the USA, spreading over the yhole international credit market.

According to our theses exports of raw materials and fuels ( E S F ) and food (ESR) to the other CMEAs are determined by supply, while tue two other groups of exported commodities (ESM m a c h i n e -ry, ENC - other, mostly consumer goods of industrial origin) are treated in quantites determined by the demand.

Country's export to the CMEA of raw materials and fuels is e x -plained as follows:

+ + +

ESF = F (XQ, MSF(-l), SSNP/ENP - SSNP/ENP (-1))

where XQ - net output of m an ufac turin g and m i n i n g ,assumed to repre-sent the supply (the last one was assumed being pro portional to the output XQ) the tendency towards bilateral balanci ng of e x

-change of this commodity group is reflected by the country's inr- ports MSF of these goods from rest of CMEA (data on bilateral flows are ndt published, hence we assume the "bilateral" balancing of the given country with the rest of CMEA), finally the impact of debt to the West (approximated by the foreign trade balance, a c -cumulated with the non-CMEA countries - SSNP) per unit af exports to this area (ENP) is introduced as

SSNP/ENP - S S N P / E N P , where SSNP/ENP is some "safe" debt/export r a t i o 8 .

Observe the plus sign expected in association with this v a r i a -ble, different from the one of similar variable in the equations for exports in the prototype model (there the variable reflects the pre s s u r e to increase exports, her e - the pre s s u r e to inćrease e xports to the West, to dec reas e the debt, with s i m u l ta ne ous r e du c t i o n of sup ply for i nt raCMEA use). The Soviet Union and B u l -garia seem not to be under the debt pressure, thus we do not i n troduce the "de bt p re isu re " var iab l e into e q u a t i o n s e x p l a i n i n g e x -po rts of these countries; Soviet Union exp ort equ at io ns co n tain as well total imports from the CMEA r ather than imports of the given groups as this country seems to employ the policy of total b a l a n c -ing with CMEA rather than co m modi ty one.

Export to CMEA is ex p lai n e d as follows: ■f ♦

ESR = f (X R , MS( -l))

w he re the ma i n sup ply ste ems from XR the net output of a g r i c u l -ture m od i f i e d by the total imports from the CMEA of the pr e viou s year. For the Sov ie t U ni on the e q u a t i o n c on ta in s a d d i t i o n a l l y i m -port MNR of food from o ut sidp of1 the CMEA (with ex p e c t e d n e g at iv e sign as one has to expect some r e d u c t i o n of the Sov iet export to

H

The v ar iabl e is ac t uall y built in such a way, that it a s -sumes n on z e r o value for the per io ds when the debt ( ac cum u lat ed b al a n c e per unit of exporte ) exc ee ds the "safe" level (in our case - is sma ll er than the level as our debt proxy is ne g a t i v e when debt is positive). The "safe" ratio was found e m p i r i c a l l y bet we en -0.8 and -1.6. The app roa c h repeats that of W e 1 í e [9].

CMEAs when it ha3 to increase import oí the same commodity group from the West).

The related import equations allocate total available supply among customers:

MSF * f (ESFW - ESF, ESF(-l)) MSR = f (ESRW - E S R , ESR(-l))

where ESFW and ESRW are total intraCMEA exports of the given c o m -modity group. Obviously we exclude the country's own export from it; on the other hand, the lagged value of this export is a s -sociated with the tendency mentioned above to balance "bilaterally" exchange inside each commodity group.

The situation in the other commodity groups: M - machinery and С - c o n sume r goods is m o d e l l e d in the rev erse order: first, the de m a n d of the c o u n t r i e s is det ermi ned, and then some a l l o c a t i o n e q u a t i o n s "al loca te" this d e m a n d b e t w e e n pot enti al suppliers.

The d em and eq u a t i o n s are thus as follows:

+ • + +

MSM = f(JM, M N M , E S ( - l ) , MSM (-l) )

+ - + ♦

MSC = f(C, M N C , E S ( - l ) , MSC (-l) )

Import of m a c h i n e r y is d e t e r m i n e d by the inv estm ent act i v i t y of the imp orte r JM, w h i le c o n s u m p t i o n С (in mo r e d i s a g g r e g a t e d ver sion this is the c o n s u m p t i o n of n o n - f o o d goods) is the d e t e r m i n a n t of imports. The ES var iabl e ref lect s the "bi l a t e r a l " b a l a n c i n g t e n denc y in m uc h the same way as in the p r e v i o u s l y d i s c u s s e d e q u a -tions; the imports from o ut side the CMEA (MNM and MNC) are ass umed as the c o m p e t i t o r s for M S M and MSC, r e s p e c t i v e l y and thus have n e g a t i v e signs of c o e f f i c i e n t s expected. Trade a g r e e m e n t s sig ned i n s ide the C ME A for m u i t i y e a r s p e r i o d s add ine rtio n to the exchange, r e f l e c t e d by i n t r o d u c t i o n of lagged e n d o g e n o u s v a r i a b l e , T h e a ll oca-tion of d e m a n d is r e a lize d by s i m p l e a l l o c a t i o n equ aoca-tions, s im ilar to the a l l o c a t i o n e q u a t i o n s for the p r e v i o u s two groups:

+ ♦

ESC = f(MSCW - MSC, E S C (-1) )

where MSMW and MSCW are total intra-CMEA imports of machinery and consumer goods, respectively.

Equations for price deflators of commodity groups in intra- -CMEA trade have been assumed the same for all countries and have the form discussed in the prototype model, with world trade deflators of related commodities (rather than total world trade deflator) serving as exp laining variables. The "common pool" a p

-proach is demonst rated on the Figure 3. *

SUPPLY DRIVEN MARKETS _{DEMAND DRIVEN MARKETS} .level I: equations for ESF and ESR equations for M5M and country generate intra-CMEA supply _{MSC generate}

intra-equation of each country -CMĽA demand of each

country level I country equatio ns

I i i

lntra-CMEA total supply of fuels and raw materia ls ESFW and ESRW are gen erat ed al l ocat ion equations d e t e r -mine possible imports MSF and MSR of each country

r 5r '

other c ou ntry 's equ atio ns

i i i

intra-CMEA total demand for machine ry and con sum p t i o n MSMW and MSCW are g e n e r a ted all ocat ion e q u a tions d et ermi ne p o s -sible exports ESM and ESC of each c ou ntry

r 1t ' r

other country 's equatio ns

Export to countries outside the CMEA determined by the world demand represented by the world exports (minus the CMEA exports) of commodities of the given group. The export equations contain as well shift variable in the form of ratio of price offered by CMEA on the world market to the world prices, the higher'the ratio, the smaller the world demand for the CMEA products., Finally supply limitations, present in some of the last years, are introduced in the form simil-ar to the combined variable shown in the equation ESF above:

I 9

ENi x f ( E N i W , PHSi : PNSWi, MNF/XQ - MNF/XQ (-1), ENi(-l)), «here i stands for symbols of raw materials and fuels F, ma- ciinery M, food R and non-food consumer goods C, ENiW is the world (outside CMEA) exports of commodities of the related group, PHSi and PNSWi - deflators of prices charged in the CMEA exports to the nonCMEA region and at the nonCMEA world market, r e s p e c t i -vely. Finally, MNF/XQ is the ratio of imports of raw materials and fuels from outside the CMEA to the net output of manufac turin g and mining - which - if one assume too low value, indicates actual supply restrictions for the given group.

The import is considered as being generated in two steps. First, the initial (unconstrained) import value is determined, as depending on the country demand (represented by net output of the economy, except for agricultural output, X - XR, in equation for imports of raw materials- and fuels M N F ; investment exp enditures JM in equation for imports of machinery MNM, consumption CNR - of non-food goods in equation for MNC, and consumption of food CR in equation for MNR). Significant modific ation is brought to the demand for imports from outside of the CMEA by the price r e l a t i o n -ship (like in the export equations ENi); import of raw materials and ,agriculture products depends also on the import of the same goods from the CMEA, the weather index IOWA is present in the import equation for agricultural goods (shortly food, although it contains raw materials of agricultural origin as wel l;.IOWA v a r ia-ble is not present in the below formula):

MNi = f (A i , PHSi/PRGi, MSi),

where i stands for F, C, M or R, Ai denotes one of the demand g e -nerating variables described above, PHS and PRG are the price indices of import from outside the CMEA and intraCMEA, r e s p e c t i -vely, MSi - related imports from the CMEA region and tilda denotes

9

the initial, unrestricted demand .

Imports from the outside of the CMEA are restricted globally by the available means to pay for them. It was assumed to have the following form:

MNP = ENP - SNP,.

■ where SNP is the current balance of foreign trade that is to be r e a lize d out side the C M E A region (thus SNP is n e g ativ e if some cre dits rare expected, or positive, if some p ay ment s are to be realized, the value being set exo geno usly) . Using import price d ef lato r PMN we cal cu l a t e the a f f orda ble imports in constant p r i c e s :

MN = MNP : PMN

and then adjust the initial imports (only if their total exceeds the a f f orda ble one) as follows:

MNi * MNi x (MN : (MNF ♦ MNR + MNC + M N M ) ) .

r

The w o r ld pri ces are ass umed exogenous, the d e f l a t o r s cal c u l a t e d from the k n o wn str uc t u r e and levels of imports in con s t a n t prices and def lato rs of trade inside the CMEA and o u t side it.

9

See note 9 for c om ment s on the c o n s t r u c t i o n of var iables alike, in the e q u a t i o n for c o n s u m p t i o n - d o m e s t i c c o n s u m p t i o n to d o m e s t i c p r o d u c t i g n of a gr icul tural sector was taken in such a variable: C/XR - C/xl?, in more d i s a g g r e g a t e d mo d e l s c o n s u m p t i o n of a g r i c ul tural goods was taken instead.

' •

"A

to!

b

5. F o r e c ast^

Consecutive version of 1ES system were used “ >for ’forecasting experiments since the beginning' of eighties. The period was e s p e -cially challenging and unfavourable as well. On one hand, the world economy as well as the CMEA economies underwent quite rapid changes of trends of growth and structure of performance, on the other hand, in such moments one is especially interested in the possibility of foreseeing the f u t u r e 1 0 .

Below we present a consecutive variant of forecast up to the year 1990. The economic situation in the starting moment of - our, forecast was not bad. The rate of growth of the world trade creased from 1.6% in 19B3 to 8.9* in 1984, mostly due to the in-crease in the activity of the American and Japaneese economies. As a result, the raw material and fuel trade increased at a similar rate, the other commodities were also trade in increased quantities, while the prices of the world trade revealed further decline (Figure 4).

Hence the world economy seems to overcome the stagnation or even decline of the early eighties, although it is not obvious for how long, the negative trends have been reverted. Generally we assume that the world trade outside the CMEA will show further i n c r e a s e :

i) exports of raw materials and fuels will grow by 5% in 1985, and by 2-3* yearly, afterwards,

ii) the machinery exports as well as the non -food consumer goods will grow by 4* in 1985, and by 3-1.5* yearly, afterwards,

iii) exports of agricultural pro ducts will grow yearly by 3-4%, until 198B, and by 2% afterwards.

World prices area expected to:

i) drop by 2% in 1985, and then'grow by 1-2% yearly in the case of raw materials and fuels,

See for example G a j d a [3]; G a j d a , S z t a u d y n -g e r [7J. The current forecast is an improved version of: G a j d a , T o m c z y k [6j. The submodel of foreign trade was first outlined in.- C z y ż e w s k i , T o m c z y k [l] , a more d e t a i l e d ve r s i o n can be found in T o m c z y k [8].

Fig. 4. Prices in the world trade 1980-1964 (after UNCTAD.Monthly Commodity Price Bulletin)

ii) increase by 1-2% yearly in the case of machinery and non- -food consumer goods,

iii) increase by IX in 1985, and by 2-3% yearly afterwards in the case of agricultural products.

Hence our assumptions assume the explosion of world prices of the second half of seventies and early eighties is now over. The CMEA prices are expected to folic« the same pattern. As the direct result of moving average basis prices of fuels and.raw materials will increase by 16% in 1985, and then by 2-3% in 1986, only in 1987-1988 it will show some 2% decrease, to stabilize in the final years. Agricultural exports are to be priced at level increased by 6% in 1986, yearly, and grow by 1% yearly afterwards. The other two groups will show the same pattern and grow by 2-3% yearly in 1985-1986, and by 1% yearly afterwards.

The situation of the European CMEAs d et erio rated in the early eighties considerably, although the degree of d e t erio ratio n d i f -fers in different countries. If we exclude Poland for a moment, aa the depth of its crisis had stronger social than economic

back-ground, the net output of the .other CMEAs experienced decline in the rates of growth but not the absolute level. Consumption, h o w e -ver, decreased not only in Poland.

Among the main sources of the CMEAs troubles one may name the following:

i) the exhaustion of extensive sources of economic growth,like free labour force or (relatively easily) available investment goods; actually the last source disappeared in some cases because investment projects started required too large expenditures and im-ports to be finished;

ii) debt burden and changes in the international credit market» iii) stagnation of the western economy with resulting res t r i c -tions of the export possibilities of CMEAs;

iv) increase of tensions between East and West with further, politically based restrictions imposed on both exports and imports of the CMEA.

Since 1903 we observe signs of recovery in the CMEA economy. To be correct one must stress that the real recovery refers to P o -land and Romania, while in the case of the other CMEAs we shall speak rather of the slow-down of the rates of growth being over. Table 1 illustrates the performance of these countries in 1982- -1984. The difficult situation of Poland and Romania can be easily seen, on the other hand Bulgaria and GDR sustain quite reasonable growth. While Bulgaria luckiiy avoided the debttrap and never a c -cumulated too large debt to the West, the spectacular advances of the GDR economy may be partially att ributed to the robust, well organized economy, partially to the special terms of intra-Germany trade, with West Germany, giving easier access to potential i m -porters of goods produced in the GDR. The Soviet Union 3eems quite robust, especially in the field of foreign trade.

One should not be mis led by the Hungarian rates of growth osc illa ting slightly above zero. Jhis economy is succesfully str uggling for the pre servation of fragile balance on domestic market, being probably in the best pos ition with the respect among the all east European CMEAs. Its low growth rates may be a t -tributed to very cautious foreign trade and investment policies d ir ected on the preserv ation of balanced market.

T a b l e 1 Basic indicators of economic development of CMEAs

in 1982-1984

S p e c i f i -cation

National

income mentsI n v e s t

-Exports Imports Debt to

total outside_CMEA total outside_CMEA W e s t d Bulgaria* 1982 1983 4.0 3.0 3.60.8 14 .3 4.4 -6.78.6 3.15.2 -13.8-8.2 3 300 2 900 198Д 4.6 1.2 8. lb 1 - 2 700 C z e c h o -slovakia 1982 1983 0.1 2.5 -1.6 0.3 5.8 5.9 -1.5 5.7 2.8 2.1 -6.5 -2.4 3 800 3 700 1984 3.2 4 .1 8 . 0 h 4 . 6b 8 . 0 b - 3 2 0 0 c GDR 1982 2.6 5.2 6.0 20.5 -5.0 -3.6 10 100 1983 4.4 0.0 11.0 7.0 5. 0 b 1 4 . 3C 11 500 1984 5.5 -5.5 5.0 - - - 11 2 0 0 L P oland 1982 1983 1984 -5.5 6.0 5.6 -12.1 9.4 8.6 8.7 10.3 9. 0 b 5.5 10.5 -13.7 5.2 9. 0 b -22.1 9.8 27 300 27 800 28 200c R omania 1982 \ 1983 2.8 4.0 -3.1 2.4 -9.5 6.0 -14.4 -3.4 -24.2 -4.3 -45.3 -31.3 11 300 9 300 1984 7.7 6.1 - - - 6 8 0 0 c H ungary 1982 1983 2.6 0.5 -2.2 -2.7 7.2 9.5 9.1 16.9 0.0 4.0 -2.6 15.0 7 300 7 5 0 (j 1984 3.0 -6.0 6 . 5 b 5. 0b 0.9 0 . 0 b 7 2 0 0 c USSR 1982 19B3 4.0 4.2 3.6 5.7 5.0 3.0 9.3 1.4 0.0 4.0 6.0 1.4 16 BOO 19 000 1984 3.2 2.0 - - - - 17 8 0 0 c

N o t e : a - cur rent prices, b - plan, с - estimate, d - min US S5.

T a b l e 2 Trade balance with countries outside CMEA

and debt td> the West assumed in forecast, mln US %

Specification 1985 1986 1987 1988 1989 1990 Trade balance: * Bulgaria 600 50Q 400 400 400 ' 400 C z e c h o s l o -vakia 600 550 500 500 500 500 GDR 700 500 500 400 400 400 Hungary 400 500 400 400 400 400 Poland 1 500 1 500 1 500 1 500 1 500 1 500 USSR 3 300 2 800 2 800 2 500 2 500 2 500 Debt (gross): C z e c h o s l o -vakia 3 200 3 200 3 000 3 000 3 000 3 000 GDR 10 600 10 600 10 600 10 600 10 ON О о 10 600 Hungary 6 ON о О 6 900 6 900 6 900 6 900 6 900 Poland 30 200 31 500 33 000 33 000 33 000 33 000 Romania 8 100 7 700 . 7 700 6 600 6 300 6 000

Table 2 shows the values of exogenous variables associated with indebtnes3 to the West. Generally, there was assumed positive foreign trade balance and reduction of the size of debt. One must admit that the assumptions about the debt of Poland and Romania are the most doubtful ones, as simultaneously with reduction of it there exists positive and quite significant growth of output. The assumed figures mean in fact that the actual debt will be reduced slightly, but the debt service payments are to be fulfilled. As it was told by prof. Pajestka, member of the Polish delegat ion for talks in Viena - countries that have largest debt cannot repay it even if they starve themselves to death to generate the n e c e s -sary export excess; Poland, however, will dutifully pay its debt service payments, since in other case it would have been punished as an example for the others. We may stress that the two-three year m o r ator ium on debt pay ments would pay more to the creditors as the economy, s t r e n gt hened by the years with less restricted raw

Basic forecast for the years 1905-1990 of the economic performance of European CMEAs

(% rates of growth) Specification 1985 1986 1987 1988 1989 1990 1 2 3 4 5 6 7 Bulgaria X 5.5 5.9 5.9 5.6 4.4 4.3 JHP 6.0 7.1 7.3 7.4 7.4 7.3 Cp 4.3 5.2 5.6 5.0 4.6 4.7 EP 14.3 7.3 6.6 6.3 6.3 6.0 ENP 3.6 4.9 , 4.6 5.3 5.2 4.3 MP 10. 3 8.0 6.6 6.2 5.9 6.3 MNP 4.5 12.1 10.8 i0.7 5.4 4.5 C z e c h o s l o -vakia X 3.2 3.5 3.7 3.2 3.2 3.2 JM 4.8 4.6 5.1 4.4 4.5 4.4 С 2.9 2.4 3-.2 3.4 3.1 2.9 EP 11.6 6.7 5.1 4.9 5.0 5.3 ENP 3.6 3.7 3.1 3.5 3.6 2.5 MP 13.6 7.5 5.8 4.3 4.6 5.1 MNP 4.1 7.1 5.0 3.5 2.7 2.7 GDR X 4.8 4.6 4.8 4.6 4.7 4.7 JM 5.7 5.6 5.5 5.4 5.5 5.4 С 3.6 3.7 3.7 3.8 3.7 3.6 EP 10.9 6.4 5.8 5.0 5.1 5.0 ENP 2.9 3.3 3.2 3.2 -3.0 . 2.6 MP 12.6 9.2 5.4 4.5 5.0 5.0 MNP 1.0 6.5 3.4 3.4 5.7 2.2 H un gary X 2.7 2.6 2.3 2.1 2.1 2.0 JM 5.2 3.3 6.6 4 . 5 4.1 4.0 С 2.8 1.9 2.8 2.9 3.0 3.0 EP 12.1 8.6 4.6 4.9 4.4 4.6 ENP 4.4 4.0 4.7 3.8 3.3 2.4 MP 16. 1 3.5 6;R 3.7 4.4 4.6 MNP 2.8 1.2' 8.6 4.3 3.7 2.6 P o l a n d X 4.2 3.5 3.6 3.8 4.3 3.7 JM 5.2 5.8 5.9 5.1 , 4.4 4.4 С 2.3 1.4 2.0 2.1 2.2 2.7 EP 12.0 8.0 5.7 5.9 5.7 6.0 ENP 4.1 4.3 2.6 4.4 3.2 2.9 MP 12.8 4.0 5.3 5.0 5.2 5.5 MNP 4.5 5.5 4.6 5.9 _{0 '}4.6 3.7

Table 3 (contd.) 1 2 3 ' 4 5 6 7 Romania X 5.0 4 . 1 4.8 4.7 4.6 4.7 3M Ć.1 4.3 6.8 5.7 5.5 6.1 С 2.9 3.9 3.4 3.4 3.5 3.5 EP 7.4 5.2 5.0 4.2 4.9 5.2 ENP 4.3 4.7 . 4.6 4.8 4.5 3.4 HP 12.3 6.8 8.0 7.6 7.6 7.1 MNP 6.1 5.6 8.1 8.6 8.6 6.7 USSR X 2.2 3.2 3.0 3.1 3.2 3.1 JM 2.8 3.5 3.0 3.2 3.2 3.3 С 2.6 3.1 2.9 2.8 2.7 2.6 EP 12.0 4.7 3.8 3.4 4.0 4.0 ENP 3.1 2.4 3.0 3.6 3.6 2.1 MP 9.2 6.2 4.2 4.8 4.5 4.0 MNP 5.3 4.1 3.2 4.7 3.8 2.2

mat eria l and fuel imports would be able to pay more and faster; these are, however, pol itical rather than eco no m e t r i c forecasts.

The other exo geno us var iables of the model were ass umed almost stable. The most important of them is employment, assumed to s t a b i l i z e in Poland, Hungary, GDR and Cze cho s l o v a k i a , or to grow by 0.5 * to 1.5% in the USSR, B ul gari a and Romania. The res ulting forecast is p r e s e n t e d in Table 3.

L o o k i n g at the mor e d e t a i l e d ver s i o n s of the for ecas t than the one p r e s e n t e d here ( G a j d a , T o m c z y k [б] ) one can cle arly see that the growth of C M E A , e c o n o m y is str ongl y b a s ed on the gr o w t h of the i n t r aC MEA trade, the last one i n c r e m e n t i n g d o m i n a t -ing p o r t i o n of the total for eign trade growth. S t a b i l i z a t i o n of pr i c e s growth, p r e s e n t e s p e c i a l l y in the sec ond half of the f o r e -c a s t i n g pe r i o d smo oths growth, w h i le the e-cho of the w or ld pri-ce changes, of early eighties, due to the m o v i n g ave rage p r i ce g e n e r a -tion p r o c e s s of the int r a - C M E A trade, can be. seen in the first years of the for e c a s t e d period.

Ge n e ral ly the forecast is quite an opt i m i s t i c one, a l t houg h we hav e an inc lin a t i o n to att ri b u t e hig her p r o b a b i l i t y of rea li z a t i o n to the less o p t i m i s t i c fra gmen ts of it (i.e. to cases of the USSR, Hun g a r y or somewha t lesser extent to C z e c h o s l o v a k i a and GDR). Bul g a r i a may hav e good rea sons for such a high growth, the datai a v a i l a b l e are, however, e x p r e s s e d in cur rent prices, thus asess- men t of impact of pri ces (co nsi d e r a b l y c h a n g e d in early eig hties)

on the rates p r e s e n t e d is not p os sibl e without add itional i n f o r m a -tion. The cases of Poland and Romania - c o u n tri es r e c over ing from deep recess are the most dep endent on s u c c e s f u l l n e s s of further r e s t r u c t u r a l i z a t i o n of economy, s t i m u l a t i o n of technical (or perhaps, in the case of these cou ntri es one should write - socio- -ec onomic progress, as there seems to be j u n c t i m bet ween the two) progress, labour p r o d u ct ivity and above other - red uc t i ó n of material costs per unit of output, being the n e c e s s a r y c o n d i t i o n for increase of output wit h s i m u l t a n e o u s res t r i c t i o n s on imports.

Final remarks needs to be wri t t e n about c o n s u m p t i o n growth. As we assumed at the b e g i n n i n g of the paper - this gro wth seems to reflect the mai n target of cen tral ly pla n n e d eco nomy better than net output, say. In all сазез not only d e c r e a s e s in c o n s u m p t i o n are not for ecasted, just the o p p o s i t e is true. Orte may, however, ex p ect that the first impact of any s er ious troubles C M E As e n -co u n t e r in the fut ure will be d i r e c t e d a ga inst c o n s u m p t i o n i n crease. Eve n in such o v e r i n v e s t e d in the past ec o n o m y as the P o lish one further i n v e s t m e n t s are n e c e s s a r y for any r e s t r u c t u r a liz atio n and ene rgy s a v i n g policy. Since in cu r r e n t times the s u c -cess of the latter can happen, "to be or not to be" of these e c o -n o m i e s - o-ne ca-n say that s l o w - d o w -n of the inv e s t m e n t g r o w t h is pos sibl e, but their r e d u c t i o n - r at her not. Thus c o n s u m p t i o n may h a p p e n to be the only a v a i l a b l e " s c a p e g o a ť ' i n the case of e c o n o m i c tur bule nces; this i^ quite o p p o s i t e to the typical p l a n n e r s he- h a v i o u r in the early eig hties, when c o n s u m p t i o n was us u a l l y a s -s u m ed the p r e f e r r e d target to be -su-s tained.

A p p e n d ix

L ist of b a s i c s ym bols

(basic units: mln of local c u r r e n c y )

A - a c c u m u l a t i o n (AC - net i n v e s t m e n t + i n v e n t o r y inv estm ent) С - c o n s u m p t i o n

D s t a n d s for i n c reas e (first d i f f e r e n c e ) of the f o l l o w i n g v a r i a -ble

E - exports, EP - cur rent prices, E - c o n stan t prices, US $ EHS- -world exports, con stan t prices, US $

J - investment (expenditures), JM - p r o d u c t i v e sphere К - fixed assets, KM - in pro d u c t i v e sphere

M - imports, MP - current prices, M - c on stan t prices, US %

N - employment, N M - in p r o d u c t i v e sphere, in thousand per sons P - price deflator, PX, PE, PM, PEHS - of X,E, M, EHS res pect ively

P as the last letter indicates m e a s u r e m e n t in cur rent prices S - S P - bala nce of f o r e i g n ,t r a d e , SP = EP - MP

S S P - a c c u m u l a t e d bal ance of for eign trade, a proxy for foreign debt S / E P = S S P :EP - a mea sure of foreign debt pre s s u r e on the economy

U - UD - dis cr e p a n c y bet ween X and XD

X - national income produced, X/N * X : NM (net) ou t p u t - l a b o u r ratio XD-nati onal income d i s t r i b u t e d

5ymbols are further e xt ende d with letters i n d icat ing com modi ty group (F - fuels, m in eral s and m e t a l s , M - m a c h i n e r y and equipment, С - other, mostly con sume r goods) in for eign trade, d i r e c t i o n of this trade (ESP -.e xpor ts to s o c i ali st countries, cur rent prices, total, MNF - import from n o n s o c i a l i s t countries, c on stan t prices, fuels), or a sector (B building, H d om esti c tra de.Q m a n u f a c -turing and mining, R - agr iculture, T - tra nspo rtati on, 0 - other sectors) etc.

Ref e r e n c e s

[1] C z y l e w s k i A. B., T o m c z y k P. (1979), For eign Trade in E c o n o m e t r i c Macromo dels, "Studia P r a w n o - E k o n o m i c z n e ” , nr 22 (Łódź).

[2] G a j d a J. (1982), Min imodel W4/79 gospodarki Polski W4/79 (Minimodel of Polish Economy), [in.] Dpisowe mod ele ekonome- tryczne (De scri ptive Ec o n o m e t r i c Models) ed. N. Łapirtaka-Sob- czak, Uni vera ity of Łódź Print.

[3] G a j d a J. (1983), The Eco nomi c D ev elop ment of Eur opea n CMEA Cou nt r i e s in 1983-1985: A E c o nome tric Model Forecast,

у "Pr evision at Ana lyse Economique", Vol. 4 (Paris).

[4] G a j d a J. (1986), The Sys tem IES2 of M i n imod els of E u r o -pean C en tral ly Planned Economies. A New Version, [in:]

Macro-models and Fo r e cas t s of National Economy, P oliśh Sci en ti fi c Editors, W a r s z a w a - Ł ó d ź .

[5] G a j d a J . , C z y ż e w s k i A . B., G ó r s к а-Н a ł a- d a j E., J u s z c z a k G . , M i s z c z y r t s l < a O., P o- t a r g o w i c z M . , S z t a u d y n g e r J . J . , T o m -c z y k P. (1986), Regional Model ol E ur o p e a n CMEA Economies, Acta Un i v e r s i t a t i s Lodzien eis, Folia o e c ono m ica 54.

[6] G a j d a J., I j m c z у к P. (1985), E c o n o m e t r i c Model of CME A Cou n t r i e s - Simulat ion, A na ly si s and Forecasts, p r s s e nt ed

to the V Wor ld C on g r e s s of E c o n o m e t r i c Society, Boston.

[7] C a j d a J., S z t a u d y n g e r J. Л. (1984), P ro gnoz y roz woju i zad łuż e nia krajów RJWPG (Forecast of D e v e l o p m e n t and Debt of CMEA Coun tri e s), Biu l e t y n Pracown i Prognoz, nr 3, IE i S UL, Lrtdź.

[8] T o m c z y k P. (1985), E k o n o m o t r y c z n y model wym ia ny h a n d l o -wej k ra jó w RWPG (E c ono m e tri c Model of F o r e i g n E x c h ang e of tho CMEA Countri es, Ph. 0. Thesis, Uni v e r s i t y of Ł ó d ź .

[9] W e l f e W. (19B3), Model W5 of the P olish Economy. General A s s u m p t i o n s and First Empirical Results, p r e s e n t e d to the E c o -nom e t r i c S oc iety E ur o p e a n Meeting, P i s3.

Ian 8. Gajda, Paweł Tomczyk

G O S P ODA RK I KR A J ÓW RWPG - M OD ELE I PROGNOZ Y OPARTE NA SYS TEMI E IES

W a rt y kul e p r z e d s t a w i o n o z ał oż en ia i s t r u k t u r ę modeli g o s p o -darki kra j ów RWPG, z bu do w a n y c h w Ins t ytucie E k o n o m e t r i i i S t a t y styki U n i w e r s y t e t u Łódzkiego. Mo d e le te, ma j ą c e kilka wursji, z a -p r e z e n t o w a n o w -p o s t aci systemu s k ł a d a j ą c e g o się z d w ó ch -podmode li - o p i s u j ą c e g o sferę gos p oda r ki na r o d o w e j p o s z c z e g ó l n y c h kr ajów oraz han d lu z a g r a n i c z n e g o , s t a n o w i ą c e g o j e d n o c z e ś n i e og n iwo ł ą c z ą -ce p o s z c z e g ó l n e mo d e l e w jeden spójny system.

W ko n strukcji modelu kr ajów RWPG p r z y j ę t o h i p o tez y o p o d obne j spe cyf i k acj i r ównań w m o d e l a c h p o s z c z e g ó l n y c h k ra jó w na p o d s t a w i e ist n i e j ą c y c h p o d o b i e ń s t w m e c h a n i z m ó w e k o n o m i cz nyc h, trendów w r o z woju h i s t o r y c z n y m itp. Za ł oże n i a s p e c y fi kac ji ró wnań z os tały p r z e d -s ta wi on e w art ykul e w po-s tac i -sch emat u wraz z u w z g l ę d n i e n i e m n a j w a ż n i e j s z y c h p o w i ą z a ń w y s t ę p u j ą c y c h m ię dzy p o d s t a w o w y m i k a t e g o r i a -mi ek o n o m i c z n y m i .opisywany-mi w modelu.

W k oń c owe j części a rt y kuł u z a p r e z e n t o w a n o p r o g n o z ę r ozwoju p o d s t a w o w y c h w s k a ź n i k ó w e k o n o m i c z n y c h k r a j ó w RWPG w latach 1985- -1990, p o p r z e d z o n ą o m ó w i e n i e m za ł o ż e ń o z m i e n n y c h e g z o g e n i c z n y c h m o d e l u .

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