This article focuses on the development of the price level during the transition years 1990 and 1991 in Czechoslovakia. It analyzes particular factors that have had impacts on the price level, namely devaluations, the removal on the negative turnover tax, and price deregulation on January 1, 1991. It attempts to quantify the effects of these measures. The role of monetary and fiscal policies in connection to the control of inflation is briefly evaluated. It is suggested that the change in the price level which is not explained directly by the above factors could be attributed to a temporary shift in the inflationary expectations or an inflationary bubble. The relevence of the concept of inflation under the described conditions is discussed. It is concluded that the changes in the price level lacked dynamic features and therefore the word ''inflation'' is not quite appropriate for the description of the investigated period in Czechoslovakia. Section 1 describes the economic framework in 1990 and 1991. It is often argued that there were no substantial changes in the Czechoslovak economy in 1990. In spite of this fact some important preliminary measures were undertaken such as three devaluations, opening the economy to foreign competition, and the removal of subsidies, i.e. of the negative turnover tax. These measures revealed two sources of disequilibria: distorted prices in the consumer market and distorted exchange rates affecting the external sector of the economy. Thus, the performed steps made the economy more transparent from this point of view. Decisive systemic changes started on January 1, 1991: the regulation of prices was practically removed and internal convertibility was introduced. Naturally, the reform package required strict macroeconomic stabilization policy to prevent the acceleration of inflation. The main emphasis of the paper is on investigating effects of the above measures on the price level. In 1990, the price level increased by 10 percent, mainly due to developments in the second half of the year when the impact of the removal of subsidies on foodstuffs and other goods appeared. For the year, this impact alone accounted for price increases of 7.2 percent. The remaining 2.8 percent is explained by 'forced substitution' and by the effect of devaluations. The jump of prices in January 1991 was higher than expected reaching 25,8 percent for the month. But the increase of the price level was under control within three months, mainly due to the restrictive monetary policy. The shift in prices was induced by more factors, generally speaking by internal and external disequilibria. The most important determinants were the effect of devaluations made in 1990 and exogenous shocks such as the break-down of the CMEA and the collapse of the former Soviet economy. Some economists argue that a large part of the price increase was brought about by the monopolistic structure of the economy; the author does not follow this argument. It is suggested that a part of the price increase could have been caused by a shift in inflationary expectation leading to an inflationary bubble. The rationale for the inflationary bubble is that increasing uncertainty pushed inflationary expectations up and, on the other hand, that the creadible restrictive macroeconomic policy led to the quick burst of the bubble. The final section is devoted to the concept of inflation in connection with the development of the Czechoslovak economy. Typically, inflation is considered to be a permanent increase of the price level. The crucial question is what the word 'permanent' means. It is argued that the specific path of the price level in Czechoslovakia does not justify tha use of the word inflation because it did not contain dynamic features. The increase was induced by single administrative measures and hence, the word inflation is not appropriate in this case.
