annual basis.<sup>29</sup> Other items, such as oil products, newspapers, cigarettes, tariffs in transportation, etc. contributed 3.7 percentage points of inflation. Thus, the administrative changes are estimated to have increased the average price level by 7.2 percent.

Intensive hoarding at the end of 1990 also helped push prices up - by 18.4 percent in the last quarter. In anticipation of the "big bang" and the price liberalization scheduled for January 1991, the public acceleraed its spending. These inflationary expectations would have led to a demand-pull in a standard market environment, but the Czechoslovak economy was still under price controls. Nevertheless, the demand pressures soaked through to prices. This happened through changes in the goods supplied to markets, as firms reduced the supply of lower quality, lower priced items and moved to higher price categories. According to some unofficial estimates, this led to an additional 1.1 percent increase in the price level. That increase has been concentrated in textiles and leather goods, but we suspect that this source of inflation was present in other areas as well. It is impossible, however, to separate this effect from the impact resulting from the removal of subsidies, which was dominant. Thus, the figure mentioned above (7.2 percent) is likely to include this inflationary factor.

The Price Bureau attributes the remaining 1.7 points of inflation to "prices by agreement" and changes in statistical methodology. However, the explanation could also lie in another factor - devaluations of the currency. There were three devaluations in the course of 1990 - in January, October and December. It is obvious that the December devaluation could not have had any impact on the price level in 1990 due to the time lag required for the effects of devaluation to work through the domestic price system. The effect of the October devaluation was, we believe, only negligible for the same reason. On the other hand, the January devaluation could, and we believe did, influence the price level; it could hardly have any impact on the prices charged by domestic firms because they were controlled , but prices of imported consumer goods are likely to have contributed to a higher price level. The crown was devalued by 15 percent and the share of imported goods in the consumer market was 10-15 percent; we, therefore, estimate that the January devaluation might have been responsible for all of the remaining 1.7 percent noted above.

Generally speaking, 1990 was characterized by first steps to liberalize prices and thus to release inflationary pressures - by removing subsidies and devaluations. Nevertheless, due to the institutional and economyiic continuation of price controls, suppressed and mainly hidden inflation still survived. It changed dramatically at the beginning of 1991.

29Source: Bureau for Prices, Federal Ministry of Finance, mimeo. The computations of the individual figures are based on CPIs of individual items supplied by the Federal Statistical Office. We can also check the figures indirectly. For instance, the price increase in foodstuffs can be verified as follows. The foodstuffs subsidies were approximately Kcs 30 billion, nominal retail sales of foodstuffs Kcs 160 billion; the ratio of nominal to hypothetical real retail sales indicates a price increase of 23 percent (=160/130).

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