Anticipated Exchange Rate Reforms

Author/Editor:

Robert P Flood ; Pierre-Richard Agénor

Publication Date:

May 1, 1992

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary:

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.

Series:

Working Paper No. 92/32

Subject:

Notes:

Also published in Staff Papers, Vol. 39, No. 4, December 1992.

English

Publication Date:

May 1, 1992

ISBN/ISSN:

9781451845075/1018-5941

Stock No:

WPIEA0321992

Price:

$15.00 (Academic Rate:$15.00)

Format:

Paper

Pages:

34

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