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Stabilization Policies in Developing Countries with a Parallel Market for Foreign Exchange A Formal Framework

The paper develops and tests a model of a developing economy that incorporates trade and capital restrictions, illegal transactions, a parallel foreign exchange market, currency substitution features, and forward-looking rational expectations. Temporary expansionary demand policies are associated wi...

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Bibliographic Details
Main Author: Agénor, Pierre-Richard
Format: eBook
Language:English
Published: Washington, D.C. International Monetary Fund 1990
Series:IMF Working Papers
Subjects:
Government And The Monetary System
Payment Systems
Investments, Foreign
Finance
Monetary Economics
Currency; Foreign Exchange
Regimes
Long-term Capital Movements
Multiple Currency Practices
Exports And Imports
International Economics
Money
Foreign Assets
International Financial Markets
Currency Markets
Foreign Exchange
Standards
Financial Markets
Currencies
Monetary Systems
Foreign Exchange Market
Exchange Rates
Money And Monetary Policy
Finance: General
International Investment
Turkey
Online Access:
Collection: International Monetary Fund - Collection details see MPG.ReNa
Description
Summary:The paper develops and tests a model of a developing economy that incorporates trade and capital restrictions, illegal transactions, a parallel foreign exchange market, currency substitution features, and forward-looking rational expectations. Temporary expansionary demand policies are associated with an increase in output and prices, a fall in the stock of net foreign assets, and a depreciation of the parallel exchange rate. The speed of adjustment is inversely related to the degree of rationing in the official foreign currency market. A once-for–all devaluation of the official exchange rate has no long-term effect on the premium
Physical Description:44 pages
ISBN:9781451923230

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