Designing Policies in the Presence of Hawala Markets

R. Kavita Rao () and Suranjali Tandon
Additional contact information
R. Kavita Rao: National Institute of Public Finance and Policy

Working Papers from National Institute of Public Finance and Policy

Abstract: To deal with rising current account deficits, the government often uses instruments such as increase in customs tariffs. These are expected to induce an appreciation in the currency. In the presence of hawala markets which constitute an alternative payment mechanism, the control exerted by the customs tariffs is diluted, thereby reducing the effectiveness of this policy in controlling depreciation of the currency. The paper explores the impact of the existence of such a mechanism on the effectiveness of various policy instruments in influencing outcomes on the official foreign exchange markets and GDP.

Keywords: Hawala Market; Exchange Rate; Direct Tax Rate; Tax Administration; Customs Tariff (search for similar items in EconPapers)
JEL-codes: F31 F32 H26 K42 (search for similar items in EconPapers)
Pages: 20
Date: 2015-01
New Economics Papers: this item is included in nep-pbe
Note: Working Paper 142, 2015
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.nipfp.org.in/media/medialibrary/2015/01/WP_2015_142.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:npf:wpaper:15/142

Access Statistics for this paper

More papers in Working Papers from National Institute of Public Finance and Policy
Bibliographic data for series maintained by S.Siva Chidambaram ( this e-mail address is bad, please contact ).