## Lessons from Haiti’s Recent Exchange Rate Developments

_IMF Working Papers, November 11, 2022_

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## Bibliographic details
- Authors: Rina Bhattacharya, Neil Shenai
- Published: November 11, 2022
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9798400226038.001

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### Summary findings
- From August to October 2020, the Haitian authorities were successful at bringing about a sharp appreciation in the gourde/U.S. dollar exchange rate.
- Foreign exchange surrender requirements had a statistically significant effect on the nominal exchange rate.
- Foreign exchange intervention by the central bank did not have a statistically significant effect on the nominal exchange rate.
- Surrender requirements raised trading costs and volatility in the foreign exchange market.
- Surrender requirements contributed to the development of a wider parallel nominal exchange rate premium.
- The appreciation contributed to a decline in headline inflation during the episode.
- The appreciation delivered some fuel subsidy-related savings to the government.
- Remittance-dependent households and exporters experienced a drop in their purchasing power.
- Haiti’s net external buffers were adversely affected.

### Analysis of mechanisms and spillovers
- Policy tool effectiveness:
  - Foreign exchange surrender requirements: statistically significant impact on nominal exchange rate; increased trading costs and volatility; widened parallel nominal exchange rate premium.
  - Central bank foreign exchange intervention: no statistically significant effect on the nominal exchange rate.
- Real economy and fiscal spillovers:
  - Headline inflation declined during the appreciation episode.
  - Government realized some savings related to fuel subsidies.
  - Remittance-dependent households: lower purchasing power.
  - Exporters: lower purchasing power.
  - Net external buffers: adverse effect noted.

### Policy recommendations and implications
- Facilitate foreign exchange management to reduce market distortions created by surrender requirements.
- Boost external sustainability to rebuild net external buffers while aligning measures with the central bank’s overall policy objectives.
- Design interventions and regulatory measures mindful of distributional effects on remittance-dependent households and exporters.
- Consider alternatives to surrender requirements that minimize trading costs, volatility, and the growth of parallel market premia.

### Publication and metadata
- Authors: Rina Bhattacharya, Neil Shenai
- Publication date: November 11, 2022
- Series: Working Paper No. 2022/225
- Issue: 225
- Volume: 2022
- Pages: 45
- DOI: https://doi.org/10.5089/9798400226038.001
- ISBN: 9798400226038
- ISSN: 1018-5941
- Subject keywords: Currency markets, Exchange rate arrangements, Exchange rates, Financial markets, Foreign exchange, Nominal effective exchange rate
- Geographic/ thematic keywords: Caribbean, Central America, Haiti, fragile state monetary policy, foreign exchange surrender requirements, reserve money programming in fragile states

*IMF Working Papers — Lessons from Haiti’s Recent Exchange Rate Developments (Working Paper No. 2022/225), Rina Bhattacharya and Neil Shenai, November 11, 2022.*

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_Source: https://www.imf.org/en/publications/wp/issues/2022/11/11/lessons-from-haitis-recent-exchange-rate-developments-525635_