Mrs. de Vries, Consultant to the Fund, was formerly Chief of the Far Eastern Division of the Fund and Lecturer in Economics at the George Washington University. She is a graduate of the Massachusetts Institute of Technology and joint author of Postwar U.S. Economic Policy (1948). The present article derives from an extensive study undertaken, with the assistance of a grant from the Ford Foundation, when the author was not on the Fund staff.
See, for example, summary of discussion on Jorge Marshall's paper, “Exchange Controls and Economic Development,” in Howard S. Ellis, Economic Development for Latin America (New York, 1961), pp. 467–68.
The unfortunate experiences with multiple exchange rates stressed here are not to be interpreted as a preference by the author for quantitative restrictions. The latter have their own weaknesses as well as some of the weaknesses of multiple rates.
Several of the economic objectives of multiple rates referred to here are elaborated in Eugene R. Schlesinger, Multiple Exchange Rates and Economic Development (Princeton Studies in International Finance, No. 2, Princeton University, 1952), and in Edward M. Bernstein, “Some Economic Aspects of Multiple Exchange Rates,” Staff Papers, Vol. I (1950–51), pp. 224–37.
Joyce Sherwood, “Revenue Features of Multiple Exchange Rate Systems: Some Case Studies,” Staff Papers, Vol. V (1956–57), pp. 74–107.
Robert Triffin, “National Central Banking and the International Economy,” International Monetary Policies (Postwar Economic Studies, No. 7, Board of Governors of the Federal Reserve System, September 1947), pp. 46–81.
J. Bhagwati, “Indian Balance of Payments Policy and Exchange Auctions,” Oxford Economic Papers, New Series, Vol. 14 (1962), pp. 51–68, considers some of the advantages that India might receive from a policy of exchange auctions rather than from the use of import restrictions.
A detailed evaluation of Thailand's exchange policies from 1946 to 1955, which is in some respects different and in some similar to the above analysis, is that of S. C. Yang, A Multiple Exchange Rate System: An Appraisal of Thailand's Experience, 1946–1955 (Madison, Wisconsin, 1957).
For details on the process by which inflation resulted in overvaluation and subsequent changes in multiple rates in several Latin American countries see Francis H. Schott, The Evolution of Latin American Exchange-Rate Policies Since World War II (Essays in International Finance, No. 32, Princeton University, January 1959).
Gertrud Lovasy, “Inflation and Exports in Primary Producing Countries,” Staff Papers, Vol. IX (1962), pp. 37–69.
Andreas S. Gerakis and Haskell P. Wald, “Economic Stabilization and Progress in Greece, 1953–61: Contribution of Foreign Exchange and Trade Reforms,” Staff Papers, Vol. XI (1964), pp. 125–49.
Not only is it difficult in practice to determine a series of exchange rates that will perform several functions simultaneously but even in theory several conditions are required. The necessary equations for multiple rates, for example, to improve the balance of payments, yield net revenue, and influence the composition of exports and imports in accordance with a development program have been set out by Werner Baer and Michel E.A. Herve in “Multiple Exchange Rates and the Attainment of Multiple Policy Objectives,” Economica, New Series, Vol. XXIX (1962), pp. 176–84.
Gertrud Lovasy, op. cit., pp. 49–53.
Israel had a system of export premiums until February 1962. One appraisal of this system concludes that, even though deliberate attempts were made to avoid misallocation of resources, multiple rates did not do so; see David Pines, Direct Export Premiums in Israel, 1952–1958 (Falk Project for Economic Research in Israel, Research Paper 16, July 1963).
W. John R. Woodley, “Exchange Measures in Venezuela,” staff papers, Vol. XI (1964), pp. 347–50.
A discussion of the extent of unification of multiple rates in Latin American countries and of the techniques used is to be found in F. d'A. Collings, “Recent Progress in Latin America Toward Eliminating Exchange Restrictions,” Staff Papers, Vol. VIII (1960–61), pp. 274–86.