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engaged fuli time and with fuli responsibility by the highest political-administrative body in the country in the most direct collaboration with the economic ministries.

After these preliminary remarks we can proceed to consideration of three aspects ot a possible stabilization program.

1. LONG-RUN ORIENTATION

On the basis of up to now very fragmentary research in the Institute of Economic Studies, the following framework of an alternative economic policy can be considered:

1.    The Yugoslav economy is passing through business cycles which are severer than in any other European country except Czechoslo-vakia. The mechanism of these cycles is today on the whole known on the basis of research carried out in the Institute of Economic Studies in Belgfade, and in the Economic Institute of the Law Faculty in Lju-bljana. An active anticyclical policy, which we do not have, is ne-cessary.

2.    The precondition of an effective anticyclical policy is reliable forecasts of short-run economic movements, which we also lack. There exists this order later in behaviour: (a) observing the phenomena, (b) preparing measures, (c) applying measures and (4) reaction of the economy.

Between (a) and (d) the time lag is of several months. Even if the measures are well prepared (which often is not the case), because of that time lag they can provoke or aggravate the instability of the economy (which is quite regularly the case). Escape from this situation is by shifting (a) ahead by a good forecast and shortening (b) and (c) by high quality expertise.

3.    Anticyclical policy consists of a complicated combination of credit-monetary and fiscal measures. Fiscal policy practically does not exist in the country and monetary policy is used where it is inappro-priate. Timely and qualitative weighing of the instruments of economic policy are possible only on the basis of econometric measurement of the reactions of economic actors and economic models of the be-haviour of the economic system. Ali initiatives to do something morę serious in these two areas have been without results until now.

4.    Administrative price control represents a foreign element in our system, lt leads to the following negative consequences:

(a)    Price disparities are increased.

(b)    The conditions of economic activity, instead of being equalized, become chaotically different for various industries.

(c)    Stimulation is the reverse of what is necessary: deficit industries become still morę deficit.

(d)    Inflation is not reduced, but only hidden. When all reserves are exhausted, price adjustment on a higher level takes place, and for controlled prices that adjustment is carried out in jumps (examples: metallurgy, energy, etc.). Thus the stability of the economy is subject-ed to additional shocks.

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