Lessons from Haiti’s Recent Exchange Rate Developments
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Summary:
From August to October 2020, the Haitian authorities were successful at bringing about a sharp appreciation in the gourde/U.S. dollar exchange rate. This paper analyzes the factors behind this appreciation and its spillovers on the economy. It finds that foreign exchange surrender requirements had a statistically significant effect on the nominal exchange rate, while foreign exchange intervention by the central bank did not. Surrender requirements were also found to have raised trading costs and volatility in the foreign exchange market and contributed to the development of a wider parallel nominal exchange rate premium. This appreciation contributed to a decline in headline inflation during the episode while delivering some fuel subsidy-related savings to the government. Remittance-dependent households and exporters saw a drop in their purchasing power, and Haiti’s net external buffers were adversely affected. Following from these findings, the paper offers recommendations on ways to facilitate foreign exchange management and boost external sustainability while contributing to the central bank’s overall policy objectives.
Series:
Working Paper No. 2022/225
Subject:
Currency markets Exchange rate arrangements Exchange rates Financial markets Foreign exchange Nominal effective exchange rate
Frequency:
regular
English
Publication Date:
November 11, 2022
ISBN/ISSN:
9798400226038/1018-5941
Stock No:
WPIEA2022225
Format:
Paper
Pages:
45
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