FIN 417 Lecture 5: Speaker - Lecture 5

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7 Feb 2017
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Notes 2-7-2017
FIN 417
Speaker Presentation
Lecture 5
Radek Cajka Czechoslovakia
Czech Economic Transition
Before WWII the Czech Republic had belonged to the most developed group of countries in the
world
o As the bipolar world was created after that, unfortunately the country had been
assigned to the socialist (communist) part of Europe
After WWII Czech Republic assigned to the eastern part of Europe dominated
by the Soviet Union
A move to a centrally planned economy because of the dominant communist
influences
In the sense of economic growth, the two economic systems went different ways since the
97’s
Process of Transition
Process had begun after the Velvet Revolution of 1989
o It was led by the newly formed elite, but also the former one (unfortunately)
People with little experience of in government were highly involved
Too many people involved selfishly looking to benefit from the changing
economic condition
Flagship of communism
The degree of state ownership was the highest among the CEE
How to implement change
Debate over shock therapy vs gradualism
Main goal was setting up the process what comes first, what comes second, how should it be
implemented
In the end, economic reforms proceeded institutional and legal ones
People who understood how to navigate the new system made substantial amounts of money
Economic Liberalization
The proper name for the process
o Liberalization of prices government sets prices of goods, rather than the marketplace
o International trade, financial transactions (making currency internationally and
externally exchangeable)
o There was also a process of privatization and reinstitution
Privatization
The way enterprises were transferred from public to private ownership
Small privatization for small business
o Often in the form of auctions
Large Privatization midsize and large firms
o In the form of voucher (coupon) privatization
Ownership
People of the Czech Republic had the option to buy stock of the companies in a given nominal
value
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