Planning the Consumption Goods Market: Preliminary Disequilibrium Estimates for Poland, 1955-1980

Abstract

This paper specifies and estimates a four-equation disequilibrium model of the consumption goods market in a centrally planned economy (CPE).The data are from Poland for the period 1955-1980, but the analysis is more general and will be applied to other CPEs as soon as the appropriate data sets are complete.The work reported here is based on previous papers of Portes and Winter and Charernza and Quandt.Portes-Winter applied to eachof four CPEs a discrete-switching disequilibrium model with a household demand equation for consumption goods, a planners'supply equation, and a "min" condition stating that the observed quantity transacted is the lesser of the quantities demanded and supplied.Charemza-Quandt considered how an equation for the adjustment of planned quantitites could be integrated into a CPE model with fixed prices and without the usual price adjustment equation.They made plan formation endogenous and permitted the resulting plan variables to enter the equations determining demand and supply.This paper implements the Charemza-Quandt proposal in the Portes-Winter context.It uses a unique new data set of time series for plans for the major macroeconomic variables in Poland and other CPEs.The overall framework is applicable to any large organisation which plans economic variables.