Anticipated Exchange Rate Reforms

By Robert P Flood, Pierre-Richard Agénor

May 1, 1992

Preview Citation

Format: Chicago

Robert P Flood, and Pierre-Richard Agénor. Anticipated Exchange Rate Reforms, (USA: International Monetary Fund, 1992) accessed November 21, 2024

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.

Subject: Currency markets, Exchange rate arrangements, Exchange rates, Financial markets, Foreign exchange, Multiple currency practices, Real exchange rates

Keywords: Anticipated exchange rate, Currency markets, Exchange rate, Exchange rate arrangement, Exchange rate arrangements, Exchange rate reform, Exchange rates, Market rate, Money stock, Multiple currency practices, Parallel exchange rate, Real exchange rates, WP

Publication Details

Pages:

34
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 1992/032
Stock No:

WPIEA0321992
ISBN:

9781451845075
ISSN:

1018-5941

Notes

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

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