Exchange-Rate Unification with Black Market Leakages - Russia 1992


WP/93/13-EA

Exchange-Rate Unification with Black
Market Leakages: Russia 1992 by Linda S. Goldberg

In 1992 the Russian authorities unified the multiple exchange rates
that had applied to international transactions. This paper describes the
multiple exchange rate system that existed in Russia before mid-1992 and
undertakes a theoretical exploration of the effects of the exchange rate
unification measures that were implemented in July 1992. The model
developed here takes account of leakages between official and black
markets and allows for flexibility of the exchange rates in both official
and parallel currency markets. Within this multiple exchange rate system
with black market leakages, the paper traces the dynamic effects on the
official and parallel foreign exchange markets of changes in the types of
policy instruments that were associated with Russia's exchange rate regime
reform. These instruments include adjustments in pegged interbank market
exchange rates, rates of foreign exchange surrender taxation, and rates of
taxation of capital account transactions.