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Efficiency Costs of Myanmar’s Multiple Exchange Rate Regime

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  • Masahiro Hori
  • Yu Ching Wong

Abstract

Myanmar's multiple exchange rate system creates various economic distortions. This paper describes the exchange rate practices in Myanmar, develops a model of foreign exchange markets, and presents the efficiency costs imposed by quasi-fiscal operation under the current exchange rate regime. The results of our model-based analyses indicate that the equilibrium exchange rate under the unified market could be at around K 400-500 per U.S. dollar, and using the equilibrium exchange rate (instead of the official exchange rate) as the accounting rate increases trade openness to more than 20 percent from less than 1 percent measured by official statistics. The total efficiency loss caused by the current multiple exchange rate regime is estimated at about 14-17 percent of GDP in 2006/07.

Suggested Citation

  • Masahiro Hori & Yu Ching Wong, 2008. "Efficiency Costs of Myanmar’s Multiple Exchange Rate Regime," IMF Working Papers 2008/199, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:2008/199
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    References listed on IDEAS

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    3. Caporale, Guglielmo Maria & Chui, Michael K F, 1999. "Estimating Income and Price Elasticities of Trade in a Cointegration Framework," Review of International Economics, Wiley Blackwell, vol. 7(2), pages 254-264, May.
    4. Huizinga, H.P., 1996. "The Taxation Implicit in Two-Tiered Exchange Rate Systems," Other publications TiSEM e01fa769-96e8-4c5e-b9b5-a, Tilburg University, School of Economics and Management.
    5. Abdelhak Senhadji, 1998. "Time-Series Estimation of Structural Import Demand Equations: A Cross-Country Analysis," IMF Staff Papers, Palgrave Macmillan, vol. 45(2), pages 236-268, June.
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    Citations

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    Cited by:

    1. Koji Kubo, 2013. "Myanmar's two decades of partial transition to a market economy: a negative legacy for the new government," Post-Communist Economies, Taylor & Francis Journals, vol. 25(3), pages 357-370, September.
    2. Koji Kubo, 2013. "Real exchange rate appreciation, resource boom, and policy reform in Myanmar," Asian-Pacific Economic Literature, The Crawford School, The Australian National University, vol. 27(1), pages 110-126, May.
    3. World Bank, 2015. "Realigning the Union Budget to Myanmar’s Development Priorities," World Bank Publications - Reports 24068, The World Bank Group.
    4. Kubo, Koji, 2012. "Restructuring the state budget system for disinflation and exchange rate unification in Myanmar," IDE Discussion Papers 320, Institute of Developing Economies, Japan External Trade Organization(JETRO).
    5. Kubo, Koji, 2013. "Sources of fluctuations in parallel exchange rates and policy reform in Myanmar," IDE Discussion Papers 388, Institute of Developing Economies, Japan External Trade Organization(JETRO).
    6. Kubo, Koji, 2012. "Trade policies and trade mis-reporting in Myanmar," IDE Discussion Papers 326, Institute of Developing Economies, Japan External Trade Organization(JETRO).

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    Keywords

    WP; exchange rate;

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