Dual Exchange Rate Systems and Capital Controls: an Investigation
نویسندگان
چکیده
The welfare aspects of dual exchange rate systems are analyzed in this paper. The requirement that domestic linancial transactions with the rest of the world be undertaken at a special foreign exchange rate is found to be equivalent to levying a tariff on this class of international transactions. Hence, a dual exchange rate system and capital controls are shown to be essentially identical. In light of the above statements, the dual exchange rate system should be regarded as a form of commercial policy and be evaluated in this context by applying the applicable standard real trade theorems.
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