Dual Exchange Rates in Europe and Latin America |
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| Authors: | Marion Nancy P |
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| Institution: | Nancy P. Marion is with the Department of Economics at Dartmouth College. This article is an outgrowth of the World Bank's project on Macroeconomic Aspects of Multiple and Black Exchange Markets. The author thanks project organizers Miguel Kiguel, Saul Lizondo, and Steve O'Connell; Robert Flood for helpful discussions; Joshua Aizenman, Pablo Guidotti, Mike Knetter, Carsten Kowalczyk, Andrew Oswald, and Alex Zanello for comments on an earlier draft; and John Dean, Murtaza Moochhala, and Rodolfo Luzio-Antezana for research assistance. |
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| Abstract: | This article uncovers some important empirical regularitiessurrounding the operation of formal dual exchange rates in Europeand Latin America in the 1970s and 1980s. Although there areparallels between the European and Latin American experiences,there are also interesting differences in terms of the sizeand nature of the distortion created by two official exchangerates; the response of the distortion to foreign interest rates,real commercial exchange rates, and domestic budget deficits;and the motives for adopting this exchange rate regime. Empiricalwork on dual exchange rate regimes is made difficult by thetransitory nature of these regimes and by frequent changes ininstitutional practices. |
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