A PRACTICAL MATHEMATICAL MODEL FOR IMPLICIT EXPORT TAXES

Jianda Chen and Samuel Choi
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Jianda Chen: The Johns Hopkins Institute for Applied Economics, Global Health, and the Study of Business Enterprise
Samuel Choi: The Johns Hopkins Institute for Applied Economics, Global Health, and the Study of Business Enterprise

No 156, Studies in Applied Economics from The Johns Hopkins Institute for Applied Economics, Global Health, and the Study of Business Enterprise

Abstract: In economies plagued by weak economic fundamentals and strict exchange rate controls, a phenomenon can occur where the true value of the local currency is less than that of the official rate. This gives rise to a black market exchange rate which heavily subsidizes imports at the expense of exporters. Governments are obligated to finance this discrepancy through implicit export taxation. This paper provides a mathematical framework which captures the dynamic between governments and exports in the context of black market premiums and currency controls.

Pages: 22 pages
Date: 2020-04
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Persistent link: https://EconPapers.repec.org/RePEc:ris:jhisae:0156

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