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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:
Foreign Exchange Market
Currency
Currencies
Money And Monetary Policy
Foreign Assets
Foreign Exchange
Long-term Capital Movements
Currency Markets
International Investment
Monetary Systems
Finance: General
Regimes
Exports And Imports
Multiple Currency Practices
Payment Systems
Government And The Monetary System
Exchange Rates
Financial Markets
Standards
Investments, Foreign
International Economics
Money
International Financial Markets
Finance
Monetary Economics
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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