Exchange Rate Unification Research Articles

Exchange Rate Determinants in Russia: 1992-93

This paper examines the evolution of the exchange rate of the ruble vis-a-vis the U.S. dollar from exchange rate unification, in July 1992, to the end of 1993. The expected and actual paths of the exchange rate are related to the exchange and trade regime and to the stance of financial and exchange rate policies. An econometric analysis based on weekly data is offered, which suggests that monetary factors have a significant impact on the short run behavior of the exchange rate.

Exchange Rate Determinants in Russia: 1992-1993

This paper examines the evolution of the exchange rate of the ruble vis-a-vis the U.S. dollar from exchange rate unification, in July 1992, to the end of 1993. The expected and actual paths of the exchange rate are related to the exchange and trade regime and to the stance of financial and exchange rate policies. An econometric analysis based on weekly data is offered, which suggests that monetary factors have a significant impact on the short run behavior of the exchange rate.

Exchange-Rate Unification with Black Market Leakages: Russia 1992

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.

Exchange-Rate Unification with Black Market Leakages: Russia 1992

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.

Anticipated Exchange Rate Reforms

Exchange rate reforms in developing countries have often aimed at floating the exchange rate in an attempt to unify the official and parallel markets for foreign exchange. This paper examines the anticipatory dynamics associated with such reforms. The analysis shows that if the future unified exchange rate is more depreciated than the prevailing official rate, a pre - announced reform will lead to a depreciation of the parallel rate upon announcement and, during the transition period, a rising premium, an increase in the rate of reserve losses, and possibly to an output contraction and an appreciation of the real exchange rate.

Alternative Dual Exchange Market Regimes: Some Steady-State Comparisons

Two dual exchange rate regimes are compared. Under one, the official market clears through changes in international reserves. Under the other, the central bank implements a rationing scheme so as to keep international reserves constant. The paper discusses the effects on inflation, the balance of payments, the real exchange rate, and the spread between the free and the official exchange rate of various economic policies, including exchange rate policy, fiscal policy, and unification of the exchange markets. It concludes that the steady-state effects for most of those policies are qualitatively the same under both regimes.

Alternative Dual Exchange Market Regimes: Some Steady State Comparisons

This paper compares two alternative dual exchange market regimes. In one of them, the official market clears through changes in international reserves, while in the other regime, the central bank implements a rationing scheme so as to keep international reserves constant. The paper discusses the effects on the rate of inflation, the balance of payments, the real exchange rate, and the spread between the free and the official exchange rate, of various economic policies, including exchange rate policy, fiscal policy, and unification of the exchange markets. It concludes that the steady state effects for most of these policies are qualitatively the same under both regimes.

Black Market Premia, Exchange Rate Unification, and Inflation in Sub-Saharan Africa

World Bank and International Monetary Fund (IMF) programs favor unification of official and black market exchange rates on the argument that multiple exchange rates misallocate resources. This article shows that such policy advice sometimes overlooks an important consideration: when multiple rates are a means of taxation, the widened deficit from unification increases inflation. This article uses the experience of Ghana, Nigeria, and Sierra Leone to illustrate the tradeoff between the benefits of unification for resource allocation and its costs for inflation.

Dual Exchange Rates in the Presence of Incomplete Market Separation: Long-Run Effectiveness and Policy Implications

The literature on dual exchange rate regimes assumes that the separation between the two foreign exchange markets is perfect. In this paper a divergence between the two exchange rates induces a flow of arbitrage activity, the magnitude of which depends on both the costs of evading exchange controls and the size of the exchange rate differential. These arbitrage flows lead to a gradual convergence of the two exchange rates. In the long run, therefore, a dual exchange rate regime with a fixed commercial rate imposes the same constraints as a fixed unified exchange rate.

Dual Exchange Rates in the Presence of Incomplete Market Separation: Long-Run Effectiveness and Implications for Monetary Policy

The existing literature on dual exchange rate regimes assumes that the separation between the two foreign exchange markets is perfect. In this paper, by contrast, a divergence between the two exchange rates induces a flow of arbitrage activity, the magnitude of which depends on both the costs of evading exchange controls and the size of the exchange rate differential. These arbitrage flows lead to a gradual convergence of the two exchange rates. In the long run, therefore, a dual exchange rate regime with a fixed commercial rate imposes the same constraints as a fixed unified exchange rate.

Optimal money stock changes and dynamic analysis of an exchange rate union : an application of linear-quadratic gaussian frameworks to a multi-country world model

A three-country model is used to formulate conduct of monetary policies as an intertemporal optimization problem for open economies. The theory of regulating stochastic linear control systems with gaussian noises and quadratic cost is then applied to compare floating exchange rate regimes and the fixed exchange rate regimes. The paper extends the literature on exchange rate regime comparison by introducing explicit intertemporal framework and by extending the model to a multi-country model

A fundamental inequality to compare dynamic effects of real and asset sector disturbances in a three-country model of the world under alternative exchange rate regimes

Dynamic effects of financial and real disturbances are compared using intertemporal optimization criteria in a world with one key and two non-key countries. A resulting inequality is used to establish conditions for an exchange rate union to exist between the two non-key countries.

Monetary union: A survey of the main issues

Exchange-rate union in the EEC would involve member countries surrendering a key instrument of economic policy. This is unlikely to find acceptance in the foreseeable future, because of the inadequacy on the one hand of substitute instruments (control of wages and prices; mobility of factors of production; regional policy) and on the other hand of compensating benefits (elimination of intra-European exchange risk and currency speculation; reduced costs of money-changing; greater immunity to US monetary conditions). The world currency situation points the way to a looser form of monetary association, a European currency bloc not committed to exchange-rate unification internally.

On Exchange Rate Unification

Journal Article On Exchange Rate Unification Get access J. Marcus Fleming J. Marcus Fleming Washington, D.C. Search for other works by this author on: Oxford Academic Google Scholar The Economic Journal, Volume 81, Issue 323, 1 September 1971, Pages 467–488, https://doi.org/10.2307/2229844 Published: 01 September 1971