Exchange Market Reform, Inflation, and Fiscal Deficits

August 1, 1995

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Format: Chicago

E. Murat Ucer, and Pierre-Richard Agénor. Exchange Market Reform, Inflation, and Fiscal Deficits, (USA: International Monetary Fund, 1995) accessed December 22, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

This paper examines the short- and long-run effects of exchange market reform in developing countries. The first part reviews the recent experience of Guyana, India, Jamaica, Kenya, Sierra Leone, and Sri Lanka with exchange market reform. The second part studies analytically the short-run dynamics of the parallel market premium and the money supply upon unification, when the post-reform regime consists of either a pure float or a managed float. The third part discusses the impact of unification on inflation and quasi-fiscal deficits, and identifies a variety of implicit taxes and subsidies that must be taken into account in assessing the longer-run effects of exchange market reform.

Subject: Currency markets, Exchange rate arrangements, Exchange rates, Financial markets, Foreign exchange, Multiple currency practices

Keywords: Adjustable peg, Cambio market, Central bank, Currency markets, Exchange market intervention, Exchange market reform, Exchange rate, Exchange rate arrangements, Exchange rate system, Exchange rates, Implementation of exchange market reform, Market rate, Money stock, Multiple currency practices, Net effect of exchange market reform, Parallel exchange rate, Paralllel market premium, Price volatility, Sub-Saharan Africa, WP

Publication Details

Pages:

62
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 1995/078
Stock No:

WPIEA0781995
ISBN:

9781451850062
ISSN:

1018-5941

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