BOFIT Discussion Papers, Institute for Economies in Transition, Bank of Finland
Causes of repressed inflation in the Soviet consumer market: Retail price subsidies, the siphoning effect, and the budget deficit
Abstract: Using recently available Soviet material, this paper
analyses the causes of repressed inflation in the Soviet consumer market
during 1965-1989. We found that retail price subsidies, which rose from 4%
of state budget expenditure in 1965 to 20% in the late 1980s, intensified
consumer market disequilibrium. The provision of these subsidies had
negative effects on the market by maintaining the purchasing power of
households for consumer goods and by increasing the budget deficit.
Furthermore, the demand of enterprises for consumer goods without
legitimate permission tended to increase during 1965-1989.
Keywords: repressed inflation; Soviet Union; retail price; subsidies; siphoning effect; budget deficit; (follow links to similar papers)
45 pages, September 7, 2000
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