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A Practical Mathematical Model For Implicit Export Taxes

Author

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  • Chen, Jianda

    (The Johns Hopkins Institute for Applied Economics, Global Health, and the Study of Business Enterprise)

  • Choi, Samuel

    (The Johns Hopkins Institute for Applied Economics, Global Health, and the Study of Business Enterprise)

Abstract

In economies plagued by weak economic fundamentals and strict exchange rate controls, a phenomenon can occur where the true value of the local currency is less than that of the official rate. This gives rise to a black market exchange rate which heavily subsidizes imports at the expense of exporters. Governments are obligated to finance this discrepancy through implicit export taxation. This paper provides a mathematical framework which captures the dynamic between governments and exports in the context of black market premiums and currency controls.

Suggested Citation

  • Chen, Jianda & Choi, Samuel, 2020. "A Practical Mathematical Model For Implicit Export Taxes," Studies in Applied Economics 156, The Johns Hopkins Institute for Applied Economics, Global Health, and the Study of Business Enterprise.
    • Handle: RePEc:ris:jhisae:0156
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    References listed on IDEAS

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    3. Fernando de Holanda Barbosa & Rubens Penha Cysne & Marcos Costa Holanda, 1992. "Underinvoicing of exports, overinvoicing of imports, and the dollar premium on the black market," Estudios Económicos, El Colegio de México, Centro de Estudios Económicos, vol. 7(1), pages 69-83.
    4. Derrese Degefa, 2001. "The parallel foreign exchange market and macroeconomic performance in Ethiopia," Working Papers 107, African Economic Research Consortium, Research Department.
    5. Pinto, Brian, 1991. "Black markets for foreign exchange, real exchange rates and inflation," Journal of International Economics, Elsevier, vol. 30(1-2), pages 121-135, February.
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