IMF Working Papers

Lessons from Haiti’s Recent Exchange Rate Developments

By Rina Bhattacharya, Neil Shenai

November 11, 2022

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Rina Bhattacharya, and Neil Shenai. Lessons from Haiti’s Recent Exchange Rate Developments, (USA: International Monetary Fund, 2022) accessed November 21, 2024

Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

From August to October 2020, the Haitian authorities were successful at bringing about a sharp appreciation in the gourde/U.S. dollar exchange rate. This paper analyzes the factors behind this appreciation and its spillovers on the economy. It finds that foreign exchange surrender requirements had a statistically significant effect on the nominal exchange rate, while foreign exchange intervention by the central bank did not. Surrender requirements were also found to have raised trading costs and volatility in the foreign exchange market and contributed to the development of a wider parallel nominal exchange rate premium. This appreciation contributed to a decline in headline inflation during the episode while delivering some fuel subsidy-related savings to the government. Remittance-dependent households and exporters saw a drop in their purchasing power, and Haiti’s net external buffers were adversely affected. Following from these findings, the paper offers recommendations on ways to facilitate foreign exchange management and boost external sustainability while contributing to the central bank’s overall policy objectives.

Subject: Currency markets, Exchange rate arrangements, Exchange rates, Financial markets, Foreign exchange, Nominal effective exchange rate

Keywords: Caribbean, Central America, Currency markets, Exchange rate arrangements, Exchange rate development, Exchange rates, Foreign exchange intervention in fragile states, Foreign exchange management, Foreign exchange surrender requirements, Fragile state monetary policy, Global, Haiti foreign exchange exchange rate, Haiti foreign exchange rate, IMF working paper 22/225, Money supply, Nominal effective exchange rate, Reserve money programming in fragile states, Sub-Saharan Africa

Publication Details

  • Pages:

    45

  • Volume:

    ---

  • DOI:

    ---

  • Issue:

    ---

  • Series:

    Working Paper No. 2022/225

  • Stock No:

    WPIEA2022225

  • ISBN:

    9798400226038

  • ISSN:

    1018-5941

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