## Exchange Market Reform, Inflation, and Fiscal Deficits

_IMF Working Papers, August 1, 1995_

## Source details

**Canonical URL:** [Exchange Market Reform, Inflation, and Fiscal Deficits](https://www.imf.org/en/publications/wp/issues/2016/12/30/exchange-market-reform-inflation-and-fiscal-deficits-1273)

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## Bibliographic details
- Authors: E. Murat Ucer, Pierre-Richard Agénor
- Published: August 1, 1995
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781451850062.001

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### Summary
- Examines the short- and long-run effects of exchange market reform in developing countries.
- Structure of the paper:
  - Part one: reviews recent experience of Guyana, India, Jamaica, Kenya, Sierra Leone, and Sri Lanka with exchange market reform.
  - Part two: 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.
  - Part three: 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.

### Case studies reviewed
- Countries explicitly reviewed:
  - Guyana
  - India
  - Jamaica
  - Kenya
  - Sierra Leone
  - Sri Lanka

### Analytical findings and focus
- Short-run dynamics analyzed:
  - Parallel market premium upon unification
  - Money supply behavior upon unification
- Post-reform exchange rate regimes considered:
  - Pure float
  - Managed float

### Impact on inflation and fiscal/quasi-fiscal deficits
- Discusses:
  - Impact of unification on inflation
  - Impact of unification on quasi-fiscal deficits
  - Identification of implicit taxes and subsidies relevant for longer-run assessment of exchange market reform

### Subjects and keywords
- Subject areas:
  - Currency markets
  - Exchange rate arrangements
  - Exchange rates
  - Financial markets
  - Foreign exchange
  - Multiple currency practices
- Keywords include:
  - adjustable peg
  - cambio market
  - central bank
  - Currency markets
  - exchange market intervention
  - exchange market reform
  - exchange rate
  - Exchange rate arrangements
  - exchange rate system
  - Exchange rates
  - implementation of exchange market reform
  - market rate
  - money stock
  - Multiple currency practices
  - net effect of exchange market reform
  - parallel exchange rate
  - paralllel market premium
  - price volatility
  - Sub-Saharan Africa
  - WP

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_Source: https://www.imf.org/en/publications/wp/issues/2016/12/30/exchange-market-reform-inflation-and-fiscal-deficits-1273_