Exchange Market Reform, Inflation, and Fiscal Deficits

Author/Editor:

E. Murat Ucer ; Pierre-Richard Agénor

Publication Date:

August 1, 1995

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:

This paper examines the short- and long-run effects of exchange market reform in developing countries. The first part reviews the recent experience of Guyana, India, Jamaica, Kenya, Sierra Leone, and Sri Lanka with exchange market reform. The second part studies analytically the short-run dynamics of the parallel market premium and the money supply upon unification, when the post-reform regime consists of either a pure float or a managed float. The third part discusses the impact of unification on inflation and quasi-fiscal deficits, and identifies a variety of implicit taxes and subsidies that must be taken into account in assessing the longer-run effects of exchange market reform.

Series:

Working Paper No. 1995/078

Subject:

Currency markets Exchange rate arrangements Exchange rates Financial markets Foreign exchange Multiple currency practices

English

Publication Date:

August 1, 1995

ISBN/ISSN:

9781451850062/1018-5941

Stock No:

WPIEA0781995

Pages:

62

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