East European Economic Reform: Some Simulations on a Structural Vector Autoregressive Model Maria Blangiewicz, University of Gdan ´ sk, Department of Econometrics, Faculty of Management, Gdan ´ sk, Poland Wojciech W. Charemza, Department of Economics, University of Leicester, Leicester, United Kingdom In this paper, a time-varying parameters model is used to evaluate the effectiveness of East European economic reform. It is constructed using a structural vector autoregressive (SVAR) methodology. This approach allows us to deal, to some extent, with the problem of continuously changing short- and intermediate-run relations. The model explains interre- lations between prices (both state controlled and free market), money demand, households’ incomes, and internal foreign exchange rates. The five-equation structural VAR system is formulated and estimated for Poland using quarterly data for 1971–91. The general specification of the model and discussion of the structural restrictions imposed is followed by an overview of the estimation results. The model is used to simulate (1) a policy of price liberalization, and (2) direct expansionary monetary policy and for (3) comparing fast and slow privatization policies. The general outcome of these experiments seems to favor a decisive, although gradual approach to economic reform.  1999 Society for Policy Modeling. Published by Elsevier Science Inc. 1. INTRODUCTION Periods of economic transition are generally regarded as being particularly difficult for a quantitative economic analysis. The collapse of existing relationships creates uncertainly and makes Address correspondence to Wojciech Charemza, Department of Economics, University of Leicester, University Road, Leicester LEI 7RH, United Kingdom. The financial support of the A.C.E. Project Structural Changes and Spillovers in the East European Reform Process is gratefully acknowledged. We are indebted to Ali Al- Nowaihi, Derek Deadman and David Pyle for their helpful comments on an earlier draft of the paper. The usual disclaimer applies. Received March 1996; final draft accepted September 1996. Journal of Policy Modeling 21(5):535–557 (1999)  1999 Society for Policy Modeling 0161-8938/99/$–see front matter Published by Elsevier Science Inc. PII S0161-8938(97)00075-6