The article deals with the role which is supposed to play macroeconomic policy during the period of privatization. Discussed are likely problems of Czechoslovak policy makers. The article does not take into account open economy issues. In the first part there is discussed the macroeconomic policy under central planning. Authors argue that the most significant feature of monetary and fiscal policy during this period was lack of macroeconomic focus. Economic policy did not try to regulate all economic agents in a neutral way, because traditional levers, like interest rates, monetary restriction, changes in government expenditures and taxes, were not arguments of an objectives function of every economic agent. The main reasons for that type of behavior were the non-homogeneity of money and absence of price clearing input markets. Instead, the role of macroeconomic policy was supposed to be played by the central plan which relied on individualized microeconomic tools. This system was both inefficient because of transaction costs and because of the tendency to further reproduce and multiply the bureaucratic apparatus. Even if the system has shown over decades certain stability it was rather petrification of existing structures than dynamic stability. In the second part authors discuss the role of macroeconomic policy in the transition period. These years are going to be characterized by changing property structure and resulting changes within objective functions should emerge. The economy will be subject to multiple shocks and to keep credibility and consistency of policy will be quite difficult, indeed. Authors argue against inflationary solution to aggregate disequilibrium which was suggested by some economists at the beginning of the reform process. The positive solution to disequilibrium and recession in the Czechoslovak economy is sought in simultaneous restriction of aggregate demand and stimulation of aggregate supply. A sole aggregate demand restriction could not solve long run growth problems and equilibrium on input markets. In the third part there are formulated dilemmas which policy makers in Czechoslovakia will be facing with. The first dilemma is the fact that the economic policy should be in the same time both contractionary, restricting aggregate demand and expansionary, stimulating the long run growth. The restrictive measures should influence the demand side and expansionary measures should influence the supply side. The second dilemma is on the side of fiscal policy - fiscal revenues and fiscal expenditures are not independent. Decreasing expenditures one would affect government revenues as well, at least in the short run. For example, lower subsidies would lead to exits of less efficient firms but firms which still have been paying taxes. Furthermore, in the presence of substantial unemployment benefits, aggregate demand could decrease by less than aggregate supply. Excess demand on the aggregate level can go up despite of restrictive policy eliminating subsidies. The third dilemma deals with the problem of interest rates. A higher real interest rate would stabilize both rate of savings and the financial system itself. A lower interest rate would be, on the other hand, beneficial for debtors. In the fourth part of the paper there are discussed features of the current system which could make realization of goals of macroeconomic policy more difficult. The most limiting features are institutional structure as a heritage of the old system and prevailing uncertainty among all economic agents. In the final part authors discuss possible ways out. The first one is creation of a stable economic framework, a necessary precondition for long run decision-making. The process of lifting regulation and subsidies will create short run fiscal revenue shocks, however, in the long run should promote economic growth with lower cost. The dilemma of interest rates does not have the solution. A solution is preserving non-zero real interest rate. Macroeconomic policy is sometimes supposed to play a role which one cannot fulfill. If current state of Czechoslovak economy was not caused by wrong macroeconomic decisions one cannot expect that this situation could be relieved using advisable ones.
