Dual Exchange Markets Under Incomplete Separation


Book Description

This paper constructs and analyzes an optimizing model of dual exchange markets which are incompletely separated owing to the presence of fraudulent cross transactions. The model is used to examine the implications of certain shocks, including devaluation. Devaluation first leads to the emergence of a spread with the financial exchange rate being relatively appreciated vis-a-vis the commercial rate. Over time, the financial rate depreciates beyond the level of the commercial rate. In the final phase of adjustment, the spread declines continuously until a zero spread is restored.







Exchange-Rate Unification with Black Market Leakages


Book Description

In 1992 Russia unified the multiple exchange rates that had applied to international transactions. This paper describes the multiple exchange rate system that existed in Russia prior to mid-1992 and undertakes a theoretical exploration of the effects of the exchange rate unification that took place in July 1992. The model developed here allows for leakages between official and black markets and permits flexibility of the exchange rates in both official and parallel currency markets. Within this multiple exchange rate system with black market leakages, we trace the dynamic effects on official and parallel foreign exchange markets of changes in the types of policy instruments associated with Russia’s exchange rate regime reform. These instruments include adjustments of pegged interbank market exchange rates, rates of foreign exchange surrender taxation, and rates of taxation of capital account transactions.




Parallel Currency Markets in Developing Countries


Book Description

The paper reviews recent theoretical and empirical developments in the analysis of informal currency markets in developing countries. The basic characteristics of these markets are highlighted, and alternative analytical models to explain them are discussed. The implications for exchange rate policy —including imposition of foreign exchange restrictions, devaluation, and unification of exchange markets— in countries with a sizable parallel market are also examined.




Parallel Exchange Rates in Developing Countries


Book Description

'...the most definitive study of the subject, assembling an all-star cast to address the many outstanding questions and succeeding beyond expectations in combining elegant theory and state of the art econometrics to reach very sensible policy conclusions.' - Mohsin S. Khan, Deputy Director, Research Department, International Monetary Fund ' This book fills an important vacuum in the literature of the economic consequences of parallel markets and should prove of great value to students of economic development and to policy-makers in developing countries as they struggle to reform their exchange rate and trade incentive systems. Here they will find all that they need to know.' - Vittorio Corbo, Professor of Economics, Universidad Catolica de Chile 'A most comprehensive treatment of the relationships between parallel foreign exchange markets and macroeconomic policies, both across countries and over time. The book substantially enhances our understanding of how these systems work in practice and will be of great interest to policy-makers, researchers and graduate students of economic policy.' - Samuel M. Wangwe, Professor of Economics, University of Dar es Salaam and Executive Director, Economic and Social Research Foundation, Dar es Salaam, Tanzania This book examines extensive empirical evidence on the macroeconomic implications of parallel exchange rates in developing countries. Eight case-studies from Africa, Latin America, and Turkey provide detailed evidence on the emergence of parallel exchange rates, their impact on macroeconomic performance, and the criteria for successful exchange-rate unification. A chapter on European dual exchange rates summarizes the contrasting experience of industrial countries. An overview chapter lays out the analytical framework, assesses the evidence, and draws policy conclusions.




IMF Staff papers, Volume 37 No. 1


Book Description

This paper examines factors affecting saving, policy tools, and tax reform. The literature on factors affecting saving and capital formation in industrialized countries is reviewed, and measurement problems are examined. The effect on the saving rate of real rates of return, income redistribution, allocation of saving between corporations and individuals, growth of public and private pension plans, tax incentives, the bequest motive, energy prices, and inflation is considered. The limited tools available to policymakers to affect savings are discussed.




Dual and Multiple Exchange Rate Systems in Developing Countries


Book Description

The parallel exchange rate (whether official or unofficial) and the resulting spread over the official exchange rate are primarily determined by macroeconomic policies. Policymakers should be cautious in adopting dual (or multiple) exchange rate systems, as they provide less insulation for domestic prices than most analysts assume.




The New Palgrave Dictionary of Money and Finance


Book Description

The first reference work ever to be awarded the Eccles Prize for Excellence in Economic Writing from Columbia Business School. Continuing in the tradition of The New Palgrave , this 3-volume set provides an unparalleled guide to modern money, banking and finance. In over 1,000 substantial essays by leading academic and professional authorities, it provides the most comprehensive analysis available of contemporary theory and the fast-evolving global monetary and financial framework. In its scope and depth of coverage, it is indispensable for the academic and practitioner alike.




Exchange Rate Reform and Structural Disturbances in a Dual Exchange Rate Economy


Book Description

This paper analyzes the implications of devaluation and a variety of structural disturbances in a dual exchange rate economy. A key feature of the model developed is its explicit recognition of both private (fraudulent) and officially-sanctioned cross transactions between the two exchange markets. The principal lesson to be learned from the analysis is that popular notions as to the effects of devaluation or of other disturbances are to be viewed with considerable caution when the dual rate regime involves inter-market transactions.




Opening the Capital Account


Book Description