Separate Exchange Markets for Capital and Current Transactions (Marches des changes distincts pour les operations sur capital et les operations courantes) (Mercados cambiarios separados para las transacciones corrientes y de capital)

Lanyi, Anthony

doi:10.2307/3866615

Cited by 50 publications

(1 citation statement)

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“…Though a dual exchange rate system might be a preferable intermediate step from a fixed exchan-ge rate to a flexible rate, the efficiency of such a regime depends on the complete separation between two markets (as represented by the current and capital accounts). Among research on separating exchange markets, the experiences of inter-market transactions in France, Italy, as well as in the BLEU, were noted by Lanyi (1975) and emphasized by Bhandari and Decaluwe (1987). The issue of determining inter-market foreign exchange flows has been hotly debated.…”

Section: Introductionmentioning

confidence: 99%

Leakages in dual exchange markets

Wang¹

2003

Prague Economic Papers

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The issue of determining inter-market foreign exchange flows under dual exchange markets has been hotly debated. Typically the literature has concentrated on the behavior of the financial premium, leaving aside equally important aspects such the reasons for and characteristics of incomplete separation. Our analytical results suggest that cross transactions arise as long as the government changes the commercial rate. Time inconsistency of policy brings opportunity for leakages between two markets. We also find that the more patient the government, the less likely the occurrence of commercial depreciation and leakages will be. Then reputation could be as a deterrent to leakages

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Section: Introductionmentioning

confidence: 99%