Advanced Search
MyIDEAS: Login to save this paper or follow this series

Exchange-Rate Management Viewed as Tax Policies

Contents:

Author Info

  • Jacob A. Frenkel
  • Assaf Razin

Abstract

The paper develops an analytical framework which demonstrates that the various forms of exchange-rate management are equivalent to corresponding tax policies. To highlight the salient issues, we consider two specific categories of exchange-rate policies. The first is a dual exchange-rate regime, which separates exchange rates for commercial and for financial transactions, and the second is a unified exchange-rate system in which the country unilaterally pegs its exchange rate at the same rate for all transactions. We show that the dual exchange rate policies can be usefully cast as distortionary taxes on international borrowing, and a unified pegged exchange-rate policies can be usefully cast as lump-sum tax cum subsidy policies. The equivalence between the various characteristics of exchange-rate management and tax management suggests that exchange-rate analysis could be usefully incorporated into the broader framework of the analysis of fiscal policies. A two-country model of the world economy is used to demonstrate the international transmission mechanism of these policies.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.nber.org/papers/w2653.pdf
Download Restriction: no

Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 2653.

as in new window
Length:
Date of creation: Jul 1988
Date of revision:
Publication status: published as European Economic Review, Vol. 33, pp. 761-781, April 1989.
Handle: RePEc:nbr:nberwo:2653

Note: ITI IFM
Contact details of provider:
Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
Phone: 617-868-3900
Email:
Web page: http://www.nber.org
More information through EDIRC

Related research

Keywords:

Other versions of this item:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Dornbusch, Rudiger, 1986. "Special Exchange Rates for Capital Account Transactions," World Bank Economic Review, World Bank Group, World Bank Group, vol. 1(1), pages 3-33, September.
  2. Alan C. Stockman & Alejandro Hernandez D., 1985. "Exchange Controls, Capital Controls, and International Financial Markets," NBER Working Papers 1755, National Bureau of Economic Research, Inc.
  3. Obstfeld, Maurice, 1986. "Capital controls, the dual exchange rate, and devaluation," Journal of International Economics, Elsevier, Elsevier, vol. 20(1-2), pages 1-20, February.
  4. Alan C. Stockman, 1978. "A Theory of Exchange Rate Determination," UCLA Economics Working Papers, UCLA Department of Economics 122, UCLA Department of Economics.
  5. Persson, Torsten, 1984. "Real transfers in fixed exchange rate systems and the international adjustment mechanism," Journal of Monetary Economics, Elsevier, Elsevier, vol. 13(3), pages 349-369, May.
  6. Frenkel, Jacob A & Razin, Assaf, 1986. "Fiscal Policies in the World Economy," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 94(3), pages 564-94, June.
  7. Greenwood, Jeremy, 1983. "Expectations, the exchange rate, and the current account," Journal of Monetary Economics, Elsevier, Elsevier, vol. 12(4), pages 543-569, November.
  8. Adams, Charles & Greenwood, Jeremy, 1985. "Dual exchange rate systems and capital controls: An investigation," Journal of International Economics, Elsevier, Elsevier, vol. 18(1-2), pages 43-63, February.
  9. Helpman, Elhanan, 1981. "An Exploration in the Theory of Exchange-Rate Regimes," Scholarly Articles 3445091, Harvard University Department of Economics.
  10. Joshua Aizenman, 1985. "On the Complementarity of Commercial Policy, Capital Controls and Inflation Tax," NBER Working Papers 1583, National Bureau of Economic Research, Inc.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Huizinga, H.P., 1997. "Real exchange rate misalignment and redistribution," Open Access publications from Tilburg University urn:nbn:nl:ui:12-73813, Tilburg University.
  2. B. Gabriela Mundaca & Jon Strand, 2005. "A risk allocation approach to optimal exchange rate policy," Oxford Economic Papers, Oxford University Press, vol. 57(3), pages 398-421, July.
  3. Paul Reding & Jean-Marie Viaene, 1995. "Capital controls and international trade finance in a dual exchange rate regime: The Belgian experience post-mortem," Review of World Economics (Weltwirtschaftliches Archiv), Springer, Springer, vol. 131(1), pages 1-27, March.
  4. Huizinga, Harry & Schaling, Eric & van der Windt, Peter C, 2007. "Capital Controls and Foreign Investor Subsidies Implicit in South Africa's Dual Exchange Rate System," CEPR Discussion Papers, C.E.P.R. Discussion Papers 6347, C.E.P.R. Discussion Papers.
  5. Cécile Daubrée & Jean-Paul Azam, 1991. "La détermination des taux de change parallèles en Afrique : modèle macro-économique et test économétrique (Nigeria, Zaïre, Ghana)," Économie et Prévision, Programme National Persée, Programme National Persée, vol. 97(1), pages 105-115.
  6. Canzoneri, M. & Rogers, C., 1989. "Is the European Community an Optimal Currency Area? : Optimal Tax Smoothing versus the Cost of Multiple Currencies," Discussion Paper, Tilburg University, Center for Economic Research 1989-23, Tilburg University, Center for Economic Research.
  7. Huizinga, H.P., 1996. "The Taxation Implicit in Two-Tiered Exchange Rate Systems," Discussion Paper, Tilburg University, Center for Economic Research 1996-100, Tilburg University, Center for Economic Research.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:2653. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.