Unification of Foreign Exchange Markets

Pierre-Richard Agénor and Robert P. Flood
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Pierre-Richard Agénor: International Monetary Fund
Robert P. Flood: International Monetary Fund
Authors registered in the RePEc Author Service: Pierre-Richard Agénor

IMF Staff Papers, 1992, vol. 39, issue 4, 923-947

Abstract: 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 short-term dynamics associated with such reforms. The analysis shows that the behavior of the parallel market premium in the periods leading to reform depends crucially on expectations about the postreform policy stance. The paper also draws the implications of the analysis for the behavior of foreign reserves, output, and the real exchange rate.

JEL-codes: F31 F41 (search for similar items in EconPapers)
Date: 1992
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