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The true shadow price of foreign exchange

  • Richard Dusansky

    ()

  • David Franck

    ()

  • Nadeem Naqvi

    ()

For the last half century, trade theorists, development economists, and development practitioners have been calculating what was claimed to be the shadow price of scarce foreign exchange. In fact, what they have been calculating is the social value of the receipt of a unit of a numeraire good from abroad, typically obtained from real models. In our paper, we explicitly deal with a model of a monetized economy, and we develop formulas for the social value of a unit of foreign currency, which, in general, differ from the traditional formulas. Copyright Springer 2000

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File URL: http://hdl.handle.net/10.1007/BF02752713
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Article provided by Springer & Academy of Economics and Finance in its journal Journal of Economics and Finance.

Volume (Year): 24 (2000)
Issue (Month): 2 (June)
Pages: 206-214

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Handle: RePEc:spr:jecfin:v:24:y:2000:i:2:p:206-214
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  1. Dusansky, Richard, 1989. "The Demand for Money and Goods in the Theory of Consumer Choice with Money," American Economic Review, American Economic Association, vol. 79(4), pages 895-901, September.
  2. Dornbusch, Rudiger, 1973. "Currency Depreciation, Hoarding, and Relative Prices," Journal of Political Economy, University of Chicago Press, vol. 81(4), pages 893-915, July-Aug..
  3. J. Peter Neary, 1980. "Nontraded Goods and the Balance of Trade in a Neo-Keynesian Temporary Equilibrium," The Quarterly Journal of Economics, Oxford University Press, vol. 95(3), pages 403-429.
  4. Corden, W.M., 1984. "The normative theory of international trade," Handbook of International Economics, in: R. W. Jones & P. B. Kenen (ed.), Handbook of International Economics, edition 1, volume 1, chapter 2, pages 63-130 Elsevier.
  5. anonymous, 1959. "The U.S. balance of payments, 1958-59," Federal Reserve Bulletin, Board of Governors of the Federal Reserve System (U.S.), issue Oct, pages 1235-1241.
  6. Avinash Dixit, 1978. "The Balance of Trade in a Model of Temporary Equilibrium with Rationing," Review of Economic Studies, Oxford University Press, vol. 45(3), pages 393-404.
  7. Edmar Bacha & Lance Taylor, 1971. "Foreign Exchange Shadow Prices: A Critical Review of Current Theories," The Quarterly Journal of Economics, Oxford University Press, vol. 85(2), pages 197-224.
  8. Jones, Ronald W, 1969. "Tariffs and Trade in General Equilibrium: Comment," American Economic Review, American Economic Association, vol. 59(3), pages 418-24, June.
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