Anticipated Exchange Rate Reforms

34 Pages Posted: 15 Feb 2006

See all articles by Pierre-Richard Agenor

Pierre-Richard Agenor

University of Manchester - School of Social Sciences

Robert P. Flood

International Monetary Fund (IMF) - Research Department; CENTRUM Business School; National Bureau of Economic Research (NBER)

Date Written: May 1992

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 anticipatory dynamics associated with such reforms. The analysis shows that if the future unified exchange rate is more depreciated than the prevailing official rate, a pre-announced reform will lead to a depreciation of the parallel rate upon announcement and, during the transition period, a rising premium, an increase in the rate of reserve losses, and possibly to an output contraction and an appreciation of the real exchange rate.

JEL Classification: F31, F41

Suggested Citation

Agenor, Pierre-Richard and Flood, Robert P., Anticipated Exchange Rate Reforms (May 1992). IMF Working Paper, Vol. , pp. 1-34, 1992. Available at SSRN: https://ssrn.com/abstract=884715

Pierre-Richard Agenor (Contact Author)

University of Manchester - School of Social Sciences ( email )

Oxford Road
Manchester, M13 9PL
United Kingdom

Robert P. Flood

International Monetary Fund (IMF) - Research Department ( email )

700 19th Street NW
Washington, DC 20431
United States
202-623-7667 (Phone)
202-623-6339 (Fax)

CENTRUM Business School

Daniel Alomía Robles s/n
Los Alamos de Monterrico
Surco, Lima, Lima 00001
Peru

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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