© 1987 International Monetary Fund
Library of Congress Cataloging-in-Publication Data
Floating exchange rates in developing countries.
(Occasional paper, ISSN 0251-6365; no. 53)
“May 1987.”
1. Foreign exchange problem—Developing countries. I. Quirk, Peter J. II. Series: Occasional Paper (International Monetary Fund); no. 53. HG3877.F58 1987 332.4’56’091724 87-3025
ISBN 0-939934-89-2
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Contents
Prefatory Note
I. Introduction
II. Experience with Instituting and Operating Market Arrangements for an Independent Float
Reasons for Floating
Choice of Floating Market Arrangements
Interbank System
Auction Markets
Issues that Have Arisen in the Choice and Implementation of Floating Arrangements
Role of the Fund in Floating Arrangements
III. Accompanying Measures In Members’ Exchange Markets
Development of Forward Exchange Market
Role of Exchange and Trade Liberalization in Floating Arrangements
IV. Developments Under Floating Exchange Rate Regimes
Exchange Market Developments
Bilateral and Effective Exchange Rates
Capital and Reserve Movements
Absorption of Black Markets
Macroeconomic Performance
Output and Trade
Inflation Effects
Comparison of Performance Under Floating with Managed Flexibility
V. Summary
Appendix
TABLES
Section
II.
1. Independently Floating Unitary Exchange Rate Arrangements in Developing Countries: Summary Characteristics
2. Fund-Supported Programs Incorporating Flexible Exchange Rate Policies, January 1983–December 1986 16
3. Independently Floating Exchange Rate Arrangements in Developing Countries, Including Elements in Fund-Supported Economic Programs, January 1983–December 1986 18
III.
4. Floating Unitary Exchange Rate Regimes in Developing Countries: Exchange and Trade Liberalization
IV.
5. Comparison of Macroeconomic Performance in Developing Countries with Independently Floating and Managed Flexible Exchange Arrangements Under Fund-Supported Programs Compared with Year Before Program
Appendix
6. Indicators of Economic Structure in Selected Developing Countries, 1985
7. Exchange Rate Arrangements as of September 30, 1986
8. Floating Exchange Rate Regimes: Exchange Rate Variability in Selected Developing Countries in the Pre-Float and Floating Periods, January 1976–June 1986
9. Floating Exchange Rate Regimes: Variability of Exchange Rates in Selected Developing Countries, January 1976–June 1986
10. Floating Exchange Rate Regimes: Exponential-Trend-Corrected Variability of Exchange Rates in Selected Developing Countries, January 1976–June 1986
11. Floating Exchange Rate Regimes: Net Capital Flows, 1980-86
12. Floating Exchange Rate Regimes: International Reserves, External Debt, Arrears, and Foreign Currency Deposits, 1980-86
13. Growth and Foreign Trade Performance in Developing Countries with Floating Exchange Rates and Fund-Supported Programs, 1981-86
14. Comparison of Average Retail Prices for Selected Goods in Uganda, Zaïre, and Sierra Leone, First Quarter 1984
CHARTS
Section
IV.
1. Floating Exchange Rate Regimes: Exchange Rate Developments in Selected Developing Countries, January 1976–June 1986
2. External Current Account Developments in Selected Developing Countries, 1981-86
3. Consumer Price Developments in Selected Developing Countries, January 1981-September 1986
The following symbols have been used throughout this paper:
… to indicate that data are not available;
— to indicate that the figure is zero or less than half the final digit shown, or that the item does not exist;
– between years or months (e.g., 1984–85 or January–June) to indicate the years or months covered, including the beginning and ending years or months;
/ between years (e.g., 1985/86) to indicate a crop or fiscal (financial) year.
“Billion” means a thousand million.
Minor discrepancies between constituent figures and totals are due to rounding.
Prefatory Note
This study was prepared by a staff team in the Exchange Restrictions Division in the Exchange and Trade Relations Department of the International Monetary Fund under the direction of Peter J. Quirk, Division Chief.
In addition to Benedicte Vibe Christensen, Mo Huh, and Toshihiko Sasaki, other contributers were Jorge Bonvicini, Graham Hacche, and Badrul Haque. Information for the study derived from the participation of the staff team and other staff members, both in the Exchange and Trade Relations Department and elsewhere in the Fund, in the formulation of these systems in the individual countries. Research assistance was capably provided by Gene Spiro. The authors also wish to thank the editor, Jennie Lee Carter of the External Relations Department.
The present study was completed in February 1987, and reflects developments up to January 1987. While the paper has benefited from comments by members of the Executive Board and by other members of the staff of the Fund, the opinions it expresses are those of the authors and do not necessarily represent the views of Executive Directors or of other staff members.
It is to be noted that the term “country” used in this report does not in all cases refer to a territorial entity that is a state as understood by international law and practice. The term also covers some territorial entities that are not states, but for which statistical data are maintained and provided internationally on a separate independent basis.