Overinvoicing,U nderutilization, and Distorted Industrial Growth

Gordon Winston

The Pakistan Development Review, 1970, vol. 10, issue 4, 405-421

Abstract: With an artificial exchange rate, a government establishes a set of prices that makes certain transactions highly profitable at the same time that it establishes laws making those transactions illegal. We usually call it "corruption" when people follow the government's price incentives instead of its contradictory legal incentives. In Pakistan, the dollar sells for 4.75 rupees in the official market but for two to three times that much in the free market. Handsome profits are made by those who can trade in both.

Date: 1970
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