Market-determined Exchange Rate Research Articles

Exchange Rate Dynamics and Agricultural Sector Performance Nexus: The Nigerian Experience

The main objective of the study is to investigate the impact of exchange rate dynamics on agricultural sector performance in Nigeria. The study employed time series data obtained from the Central Bank of Nigeria statistical bulletin, World Development Indicators and National Bureau of Statistics. Agricultural sector performance was disaggregated into the overall agricultural, crop, livestock and fishery output. Autoregressive Distributive Lag (ARDL) and Generalized Autoregressive Conditional heteroskedasticity (GARCH) estimation techniques were used to establish the long run relationship among the variables, and the responsiveness of overall agricultural output, crop, livestock and fishery production to changes in exchange rate. It was revealed that long run relationship exists among the variables in all the estimated models. The result of the Error Correction Mechanism (ECM) within the framework of the ARDL shows that exchange rate has significant impact on agricultural sector performance. The GARCH results revealed that the responsiveness of aggregate agricultural output, crop, livestock and fishery production to changes in exchange rate is negative and statistically significant. This study concludes that the government must consciously direct policy actions towards the agricultural sector to achieve its full potentials in order to place the Nigerian economy on the path of self- sufficiency in agricultural production. The study recommends that; the government should implement appropriate exchange rate policy that will ensure sufficient crop production for both domestic consumption and exports. The movement in the market determined exchange rate should be strictly monitored by the apex bank, in order to ensure that the deregulation in exchange rate is not counterproductive through distortionary prices on agricultural production.

PIDE Commentary: On the 23rd IMF Programme for Pakistan


 
 
 
 
 International Monetary Fund (IMF) issued a staff report on the seventh and eighth reviews of the extended arrangement under the Extended Fund Facility (EFF) on September 1, 2022. As per the review report, the authorities of Pakistan are allowed to draw USD 1.1 billion, keeping in view the measures taken by authorities to address fiscal and external challenges. The IMF board has also approved the extension of the EFF till June 2023 along with extra Special Drawing Rights (SDR) of 720 million and that brings the total access under the EFF to about USD 6.5 billion. The review report has also identified some priority measures to be considered by the Pakistani authorities, such as the implementation of an approved budget, marketdetermined exchange rate policy, proactive and prudent monetary policy, the expansion of the social safety net, and structural reforms related to the performance of state-owned enterprises (SOEs) and governance. The set of measures that have been identified contains both short-term and medium-term measures to promote long-term growth. In this regard, the Pakistan Institute of Development Economics (PIDE) has also been working extensively to identify the measures that are necessary to remove the bottlenecks in the economy to improve productivity and increase growth. Therefore, the objective of this document is twofold, i.e., a commentary on the measures suggested by the review report, and what other measures should be part of the programme.
 
 
 
 

Effect of Real Exchange Rate Volatility and Selected Macroeconomic Variables on Trade Exports Performance in Kenya

Kenya’s export performance is still constraint by high level of inflation, high-interest rates, low savings, low investments, and fluctuating exchange rates. Generally, Kenya’s exports have performed dismally in the recent past. It is not yet clear as to whether this poor export performance can be attributed to exchange rate volatility since, existing empirical evidence show mixed findings. The study sought to establish the impact of exchange rate volatility on Kenya’s exports performance for the period 1974 – 2018. Autoregressive Distributed Lag model (ARDL) with bounds test was estimated and it was found that ARCH term t-ratio was significant which indicated that exchange rate is volatile. exchange rate volatility, terms of trade, inflation money supply and trade openness were significant. Based on these results, it is recommended the government should reconsider exchange rate policies that will prevent high exchange rate fluctuations, suggests that the monetary authorities in the Kenya should come up with monetary policy strategies that will help drive the economy better are necessary for economic expansion, Kenya should maintain its market determined exchange rate and implement a monetary policy aimed at confining inflation to levels that are at par or lower than those of trading partners, the government should review trade policies and take advantage of trade openness to reap from trade liberalization. The study further realized interdependence between exchange rate stability, macroeconomic stability and export performance and hence policy makers need to consider the existing degree and likely effects of exchange rate volatility while designing, developing and implementing trade policies in Kenyan Economy.

A Study on Derivative Market in India

Since 1991, thanks to economic policy liberalization, the Indian economy has entered an era in which Indian businesses can no longer disregard global markets. Prior to the 1990s, the prices of a variety of commodities, metals, and other assets were carefully regulated. Others, which were not rolled, were primarily dependant on regulated input costs. As a result, there was no uncertainty and, as a result, no price fluctuations. However, in 1991, when the process of deregulation began, the prices of most items were deregulated. It has also resulted in the exchange being partially deregulated, easing trade restrictions, lowering interest rates, and making significant advancements in foreign institutional investors' access to the capital markets, as well as establishing market-based government securities pricing, among other things. Furthermore, portfolio and securities price volatility and instability were influenced by market-determined exchange rates and interest rates. As a result, hedging strategies employing a variety of derivatives were exposed to a variety of risks. The Indian capital market will be examined in this study, with a focus on derivatives.

Intellectual entrepreneurs and U.S. International monetary policy change in the early 1970s

ABSTRACT This study analyzes U.S. international monetary policy change in the early 1970s, with a focus on the role of intellectual entrepreneurs. Drawing on the literature regarding neoliberalism, policy entrepreneurs, and punctuated equilibrium, the author claims that laissez-faire economists—most notably, Milton Friedman and George Shultz—effectively exploited an external shock in persuading key policy audiences and undermining the existing policy regime. Their entrepreneurship, as well as economic ideas, facilitated the turn to a monetary system based on market-determined exchange rates. As such, this research bridges different aspects of neoliberalism: intellectual and policy aspects. Also, it contributes to the scholarship on policy entrepreneurs by suggesting a new strategy: policy neglect. Policy entrepreneurs may refrain from fully implementing existing rules, which, in punctuated equilibrium, can lead to non-compliance on a large scale, instigating a radical policy shift. Further, this research responds to a recent call to examine contextual factors that affect policy entrepreneurship. The policy domain of foreign economic affairs poses distinct challenges and opportunities for policy entrepreneurs, with special implications for policy venue shopping and non-traditional policy audiences.

Volatility in Exchange Rate of Indian Rupee in Pre and Post Market-Determined Exchange Rate Regime

Volatility in Exchange Rate of Indian Rupee in Pre and Post Market-Determined Exchange Rate Regime

Comments by Iris Claus, on Exchange Rate Flexibility, Financial Market Openness, and Economic Growth

February 01 2018 Comments by Iris Claus, on Exchange Rate Flexibility, Financial Market Openness, and Economic Growth Author and Article Information Online Issn: 1536-0083 Print Issn: 1535-3516 © 2018 by the Asian Economic Panel and the Massachusetts Institute of Technology2018Massachusetts Institute of Technology Asian Economic Papers (2018) 17 (1): 163–165. https://doi.org/10.1162/asep_a_00596 Cite Icon Cite Permissions Share Icon Share Facebook Twitter LinkedIn MailTo Views Icon Views Article contents Figures & tables Video Audio Supplementary Data Peer Review Search Site Citation Comments by Iris Claus, on Exchange Rate Flexibility, Financial Market Openness, and Economic Growth. Asian Economic Papers 2018; 17 (1): 163–165. doi: https://doi.org/10.1162/asep_a_00596 Download citation file: Ris (Zotero) Reference Manager EasyBib Bookends Mendeley Papers EndNote RefWorks BibTex toolbar search Search Dropdown Menu toolbar search search input Search input auto suggest filter your search All ContentAll JournalsAsian Economic Papers Search Advanced Search Iris Claus: Economic recovery following the 2008–09 global financial crisis has been slow. To accelerate economic growth, policy recommendations by G-20 countries have been to correct global imbalances by implementing structural reforms and more market-determined exchange rate systems. In their paper, Il Houng Lee and Kyunghun Kim take a different view. They argue that greater exchange rate flexibility by itself cannot resolve global imbalances and “policymakers should consider the long-term growth effect when formulating exchange rate policy as it could be a useful policy option for emerging markets with limited policy independence.” Lee and Kim first define which countries should be classified as emerging economies and then assess the usefulness of greater exchange rate flexibility as a policy tool to (i) reduce the probability of a currency crisis; and (ii) to support long-run economic growth. A currency crisis is defined as an annual depreciation against the U.S. dollar of... You do not currently have access to this content.

Does foreign bank presence affect interest rate pass-through in emerging and developing economies?

The impact of greater foreign bank presence on domestic monetary policy transmission has become a subject of importance for emerging and developing economies (EMDEs) as several of them have gravitated towards more market determined exchange rate regimes and consequent use of interest rates as the primary instrument for macroeconomic management. In this paper, we explore the impact of foreign bank presence on interest rate pass-through for a panel of 57 EMDEs over the period 1995–2009. Our empirical results suggest that there are strong threshold effects in terms of foreign bank presence and its impact on the strength of interest rate transmission. Foreign bank presence tends to reduce lending rates and enhance interest-rate pass-through in countries that have a relatively high degree of foreign bank presence compared to those with limited presence. On the other hand, foreign banks do not play any significant role in interest rate transmission in low threshold economies. We further find that the when foreign bank presence is associated with a decline in banking competition, it appears to lower the interest rate transmission.

An Assessment of the Impact of Exchange Rate Deregulation and Structural Adjustment Programme on Cotton Production and Utilization in Nigeria

At Nigeria’s independence, agriculture was the mainstay of the economy. It provided employment, food, raw materials for industry and foreign exchange. However, within 20 years of Independence the country became unable to cope with the overall needs of its food and raw materials. Increased foreign exchange earnings from the export of crude oil were implicated as leading to the neglect and subsequent decline in the performance of the Nigerian agricultural sector. The Structural Adjustment Programme SAP was adopted to restructure and diversify the productive base of the economy in such a way as to reduce dependency on the oil sector and imports. One of the key policy strategies designed to achieve the Nigeria's SAP goals was the adoption of a market-determined exchange rate. This paper set out to assess the impact of exchange rate deregulation and SAP on cotton production and utilization in Nigeria. Time series data on aggregate cotton production, Naira’s average cross exchange rates with the US dollar and average capacity utilization rate of textile manufacturers in Nigeria for the period 1973-2007 were collected and analysed using Multiple-regression and the student’s t test technique. Findings includes: exchange rate deregulation per se has no significant effect on cotton production in Nigeria; more cotton was produced in Nigeria during the post-SAP period; the average capacity utilization of domestic textile industry in Nigeria during the pre-SAP period was higher than during the post-SAP period. Based on the findings of the study some noteworthy lessons were highlighted.

SEIGNIORAGE, LEGAL TENDER, AND THE DEMAND NOTES OF 1861

I. INTRODUCTION Shortly after the onset of hostilities at Fort Sumter, the Lincoln administration asked Congress to authorize the first large-scale issue of federal paper currency. Officially labeled as United States Notes, they were popularly known as the Demand Notes of 1861. The administration's action is unremarkable. The extraordinary revenue requirements of long and costly wars are often met, in part, by issuing paper money. More surprising (and not widely recognized) is that this initial issue of paper money carried provisions that largely prevented it from yielding sustainable revenue (seigniorage). These provisions were largely omitted for the successor currency to the 1861 Notes (also known as United States Notes, but popularly as Greenbacks). As a result, its seigniorage potential was greater (although seigniorage was limited by other provisions). In modern software jargon, the Greenbacks might be viewed as 1861 Notes version 2.0: a version better suited to sustain a flow of seigniorage. However, the government was unable to replace the latter with the former very quickly, resulting in an extended period during which two paper currencies with different properties circulated side by side both with each other and with gold coin. This somewhat untidy situation provides an interesting (and heretofore underexploited) experiment for economists. These alternative monies circulated widely with market-determined exchange rates for a substantial period during which the amounts of both paper currencies in circulation greatly increased before the 1861 Notes were removed from circulation. We have collected daily data on these exchange rates and report them as differing gold premiums for the competing paper monies. Below, these data are exploited to calculate the seigniorage cost of the various provisions of the 1861 Notes and to provide evidence on alternative theories of expectations formation during this period. Our paper has three sections. The first presents a more extensive discussion than has been previously available of the 1861 Notes. In the second, a simple analytical framework is used to demonstrate and, where possible, estimate the seigniorage costs of the provisions attached to these notes. The third section analyzes the market relationship between gold and the simultaneously circulating 1861 Notes and Greenbacks prior to the (all but complete) retirement of the former in 1863. The paper concludes with a summary. II. THE DEMAND NOTES OF 1861 The major focus of this paper is on the Demand Notes of 1861, the first large-scale federal experiment with paper money. (1) We concentrate on these notes for two reasons. First, little has been written about them. Mitchell (1902), in his pioneering work on Civil War finance, devotes only 7 pages to them while devoting 17 pages to fractional currency and minor coins during the war. In addition, most of his discussion concerns the period prior to suspension. More recently, Calomiris (1988a, 1988b, 1992) makes reference to the 1861 Notes, but only as a part of his discussion of Greenbacks. Second, the paradox of issuing largely seigniorage-free paper money to help finance a war has not been well recognized and, hence, largely unexplained. This conflict between means and ends is interesting in its own right and illuminates some of what is puzzling in the sequence of monetary events over the first half of the Civil War. As a part of our discussion of the 1861 Notes, we challenge or extend the existing literature in three ways. First, we demonstrate that the conclusion of Studenski and Krooss (1963, 141, 144) that these notes were only used by the government to pay salaries and, hence, in their words, were a pseudomoney is mistaken. Examination of the financial press of the day suggests that these notes were not only popular but also circulated widely as money. A convincing claim can be made that they were indeed a national currency. …

The Indian Economy: A Study of its Susceptibility to Fuller Capital Account Convertibility (CAC)

The purpose of the project is to find out possible implications for fuller Capital Account Convertibility (CAC) in the Indian context. Fuller CAC implies selling and buying financial assets overseas in market determined exchange rate, which indicates abundant inflow and outflow of FII, FDI in the capital market. Any change in this flow can affect the economy either directly or in an indirect manner. Therefore it is important for any economy to keep a balance between the inward and outward flows of capital across the country. Currently India is experiencing a high momentum cash inflow and withdrawal by Foreign Institutional Investors (FII) and in the backdrop of recent East Asian economic crisis, this calls for special attention. This paper tests the randomness and stationarity of the Indian Stock market (through NIFTY) and then analyzes the long term influence of FII and Mutual Fund on NIFTY performance. Finally it tests for any significant decline in GDP growth in a few East Asian countries before and after fuller CAC implementation. This paper concludes that fuller CAC does not ring an immediate alarm on the performance of the stock market, however GDP growth has been affected post-implementation in other developing countries. India needs to guard itself so that fuller CAC does not make it dependent on foreign investments, rather should give an impetus for robust industrial development.

A Theory of Managed Floating

After the experience with the currency crises of the 1990s, a broad consensus has emerged among economists that such shocks can only be avoided if countries that decided to maintain unrestricted capital mobility adopt either independently exchange rates or very hard pegs (currency boards, dollarisation). As a consequence of this view which has been enshrined in the so-called impossible trinity all intermediate currency regimes are regarded as inherently unstable. As far as the economic theory is concerned, this view has the attractive feature that it not only fits with the logic of traditional open economy macro models, but also that for both corner solutions (independently exchange rates with a domestically oriented interest rate policy; hard pegs with a completely exchange rate oriented monetary policy) solid theoretical frameworks have been developed. Above all the IMF statistics seem to confirm that intermediate regimes are indeed less and less fashionable by both industrial countries and emerging market economies. However, in the last few years an anomaly has been detected which seriously challenges this paradigm on exchange rate regimes. In their influential cross-country study, Calvo and Reinhart (2000) have shown that many of those countries which had declared themselves as independent floaters in the IMF statistics were charaterised by a pronounced of floating and were actually heavily reacting to exchange rate movements, either in the form of an interest rate response, or by intervening in foreign exchange markets. The present analysis can be understood as an approach to develop a theoretical framework for this behaviour that - even though it is widely used in practice - has not attracted very much attention in monetary economics. In particular we would like to fill the gap that has recently been criticised by one of the few middle-ground economists, John Williamson, who argued that managed is not a regime with well-defined rules (Williamson, 2000, p. 47). Our approach is based on a standard open economy macro model typically employed for the analysis of monetary policy strategies. The consequences of independently and market determined exchange rates are evaluated in terms of a social welfare function, or, to be more precise, in terms of an intertemporal loss function containing a central bank's final targets output and inflation. We explicitly model the source of the observable fear of by questioning the basic assumption underlying most open economy macro models that the foreign exchange market is an efficient asset market with rational agents. We will show that both policy reactions to the fear of (an interest rate response to exchange rate movements which we call indirect floating, and sterilised interventions in the foreign exchange markets which we call direct floating) can be rationalised if we allow for deviations from the assumption of perfectly functioning foreign exchange markets and if we assume a central bank that takes these deviations into account and behaves so as to reach its final targets. In such a scenario with a high degree of uncertainty about the true model determining the exchange rate, the rationale for indirect is the monetary policy maker's quest for a robust interest rate policy rule that performs comparatively well across a range of alternative exchange rate models. We will show, however, that the strategy of indirect still bears the risk that the central bank's final targets might be negatively affected by the unpredictability of the true exchange rate behaviour. This is where the second policy measure comes into play. The use of sterilised foreign exchange market interventions to counter movements of market determined exchange rates can be rationalised by a central bank's effort to lower the risk of missing its final targets if it only has a single instrument at its disposal. We provide a theoretical model-based foundation of a strategy of direct in which the central bank targets, in addition to a short-term interest rate, the nominal exchange rate. In particular, we develop a rule for the instrument of intervening in the foreign exchange market that is based on the failure of foreign exchange market to guarantee a reliable relationship between the exchange rate and other fundamental variables.

Monetary Policy by Indonesia, Malaysia and Thailand in the Era of Excess Forex Reserves

Prior to the 1997 crisis, the three economies, namely Malaysia, Thailand and Indonesia, used either fixed or heavily managed exchange rate policies. There is a great deal of debates regarding the reasons of the East-Asian crisis by which these countries were more or less affected. The issue of an ‘ideal exchange rate policy’ is also hotly debated. However, after a decade, the problem of crisis has been transformed from a ‘crisis’ to a ‘surplus.’ The monetary authorities of these economies are facing the challenges of managing the reserves. Both the Bank of Thailand and Malaysia has moved from fixed to market-determined exchange rate system. Malaysia, however sticks to the fixed exchange rate policy. All the three economies have moved from base money to inflation targeting. They are using different instruments to set short-term interest rate. The Monetary Policy Committee (MPC) of the Bank of Thailand has set-up the rate of interest within the targeted zone of 3.5 per cent (per year).Other two economies are, however, not so rigid in maintain inflation-target.

Exchange Rate Policy and the Management of Official and Private Capital Flows in Africa

During the 1990s a number of African central banks succeeded in bringing inflation to relatively low levels while maintaining a market-determined exchange rate. These central banks were generally reluctant to fully subordinate exchange rate targets to monetary targets, however, particularly in the face of large external shocks. We focus on the management of highly persistent shocks to aid flows, including PRSP-related increases in net flows, in the presence of currency substitution by the domestic private sector. Such shocks have beneficent long-run effects, but when currency substitution is high they can produce dramatic macroeconomic management problems in the short run. What is the appropriate mix of money and exchange rate targeting in such cases, and the role of temporary sterilization? We analyze these and related issues in an intertemporal optimizing model that allows a portion of aid to be devoted to reducing the government's seigniorage requirement. This creates a strong link between official aid flows and private capital flows, giving rise to tradeoffs reminiscent of the literature on private capital inflows in emerging markets. When the credibility of policymakers' commitment to low inflation is firm, some degree of dirty floating, with little or no sterilization of increases in the monetary base, is the most attractive approach.

Monetary Policy Rules, Asset Prices, and Exchange Rates

During the 1990s a number of African central banks succeeded in bringing inflation to relatively low levels while maintaining a market-determined exchange rate. These central banks were generally reluctant to fully subordinate exchange rate targets to monetary targets, however, particularly in the face of large external shocks. We focus on the management of highly persistent shocks to aid flows, including PRSP-related increases in net flows, in the presence of currency substitution by the domestic private sector. Such shocks have beneficent long-run effects, but when currency substitution is high they can produce dramatic macroeconomic management problems in the short run. What is the appropriate mix of money and exchange rate targeting in such cases, and the role of temporary sterilization? We analyze these and related issues in an intertemporal optimizing model that allows a portion of aid to be devoted to reducing the government's seigniorage requirement. This creates a strong link between official aid flows and private capital flows, giving rise to tradeoffs reminiscent of the literature on private capital inflows in emerging markets. When the credibility of policymakers' commitment to low inflation is firm, some degree of dirty floating, with little or no sterilization of increases in the monetary base, is the most attractive approach.

The Modern History of Exchange Rate Arrangements: A Reinterpretation

We develop a novel system of re-classifying historical exchange rate regimes. One difference between our study and previous classification efforts is that we employ an extensive data base on market-determined parallel exchange rates. Our 'natural' classification algorithm leads to a stark reassessment of the post-war history of exchange rate arrangements. When the official categorization is a form of peg, roughly half the time our classification reveals the true underlying monetary regime to be something radically different, often a variant of a float. Conversely, when official classification is floating, our scheme routinely suggests that the reality was a form of de facto peg. Our new classification scheme points to a complete rethinking of economic performance under alternative exchange rate regimes. Indeed, the breakup of Bretton Woods had a far less dramatic impact on most exchange rate regimes than is popularly believed. Also, contrary to an influential empirical literature, our evidence suggests that exchange rate arraignments may be quite important for growth, trade and inflation. Our newly compiled monthly data set on market-determined exchange rates goes back to 1946 for 153 countries.

A Leading Indicators Approach to the Predictability of Currency Crises: The Case of Turkey

In this paper, we present a leading economic indicators approach to the predictability of currency crises in Turkey. After summarizing main theoretical models of currency crises and discussing the possible origins of financial crises in the European ERM countries (1992-93), Turkey (1994) and Southeast Asian countries (1997-98), we survey the empirical literature on the predictability of currency crises. Our leading economic indicators approach based on Burns and Mitchell (1946) shows that terms-of-trade, market-determined exchange rate over official exchange rate and some specific survey data can be considered as major leading economic indicators of currency crises in Turkey.

The EMU and the NAMU: What Is the Case for North American Monetary Union?

The paper considers the pros and cons for Canada of monetary union between Canada and the United States. The current Canadian monetary arrangements, a flexible exchange rate and an inflation target, are contrasted both with a unilateral adoption by Canada and the US dollar and with a full, formally symmetric monetary union. Macroeconomic transactions costs savings argue in favour of either form of monetary union. Seigniorage considerations argue against unilateral adoption of the US dollar, but in favour of a formally symmetric monetary union. Loss of the lender of last resort is a powerful argument against unilateral monetary union. The optimal currency area arguments (which concern the macroeconomic stabilization aspects of a permanently fixed exchange rate) probably favour either form of monetary union. The shock-absorber properties of a flexible exchange rate are dominated by the extraneous instability and excess volatility inherent in a market-determined exchange rate when financial markets are highly integrated. On balance, the economic arguments favour a full, formally symmetric monetary union but not the unilateral adoption of the US dollar. Because of the absence of any democratic political institutions spanning both Canada and the United States, the political arguments against any form of monetary union are overwhelming. Without a North American Political Union, the transfer of national sovereignty to a supranational central bank would lack political legitimacy. The lack of institutions for ensuring the political accountability of a North American Central Bank means that NAMU is unlikely to happen and that, if it were to happen, it is unlikely to survive.

The private ECU markets: What they are, why they exist, and where they may go

The private ECU has moved beyond a currency basket to function fully as a currency in the financial markets, with market-determined ECU interest rates and a market-determined exchange rate that the banks peg to the basket. A utility maximizing model is developed that explains the existence of the ECU financial markets, where demands for ECU-denominated financial instruments must depend on risk aversion and acquisition costs. Transactions demand for ECUs is based almost solely on ECU transactions in the financial markets. The ecu's future as an independent currency with a floating exchange rate will require a central bank to control supply and an ECU money demand that is based on ECU transactions in goods and services.

Coffee After Copper? Structural Adjustment, Liberalisation, and Agriculture in Zambia

In contrast to its policies in the economic sphere, Zambia has one of Africa's most liberal approaches to press freedom. To convey the flavour of public debate during, or immediately after, the 19-month experiment with a market-determined exchange rate, 10 quotations are presented below:Large scale mining will continue for 12 to 20 years, but small-working may go on for 50–60 years.– Francis Kaunda, Chairman, Zambia Consolidated Copper Mines, June 1987.Coffe after copper.– Campaign slogan of the Coffee Growers Committee of the Commercial Farmers' Bureau.Even real socialist countries have to find and use foreign exchange.– Kebby Musokotwane, Prime Minister, replying to a question in the National Assembly, August 1986.Zambia's cardinal mistake was to subsidise consumption for a long time, thereby delaying diversification.– Kenneth Kaunda, President of Zambia, May 1986.The economic reform programme has begun to succeed: devaluation has stimulated exports.– Kenneth Kaunda, August 1936, Opening the 21st U.N.I.P. National Council Meeting.It was not socialist principles which ruined the Zambian economy, but unfavourable economic terms which the North has imposed on the South…I have no power…we agreed to the IMF reform programme much against out better judgement.– Kenneth Kaunda, August 1986, interviewed by Swedish, West German, and Cuban journalists.