Goldberg, Linda (1993a), “Exchange Rate Unification with Black Market Leakages: Russia 1992,” IMF Working Paper 93/13 (Washington: International Monetary Fund, 1993).
Goldberg, Linda (1993b), “Foreign Exchange Markets in Russia: Understanding the Reforms,” IMF Paper on Policy Analysis and Assessment 93/1 (Washington: International Monetary Fund, 1993).
Goldberg, Linda, and Ildar Karimov, “Internal Currency Markets and Production in the Emerging Market Economies,” Journal of Comparative Economics (forthcoming).
International Monetary Fund (1992b), Economic Review: The Economy of the Former USSR in 1991 (Washington: International Monetary Fund, 1992).
Linda S. Goldberg is an Assistant Professor of Economics at New York University. She holds a doctorate from Princeton University. This work was undertaken while the author was a Visiting Scholar in the Research Department of the International Monetary Fund. The views expressed herein are those of the author and not necessarily those of the International Monetary Fund. The author acknowledges numerous helpful comments, especially those of Ernesto Hernandez-Cata, Benedicte Vibe Christensen, Mohsin Khan, Malcolm Knight, and Robert Rennhack.
A model of dual exchange rate unification of the type pursued by Russia is provided in Goldberg (1993a).
This was the dominant system in place, although it must be noted that it was further complicated by all sorts of exemptions from surrender requirements and methods of avoiding use of the official auction and interbank system. IMF (1992a and 1992b) provide information on the exchange rate regime in Russia in 1991 and early 1992.
Export taxes, which were often not paid because of exemptions or illegal circumventions, are omitted from the examples.
Since this paper considers the returns to the marginal dollar of earnings, it does not adjust the results for the production costs facing an enterprise. This type of adjustment, which is relevant since profit tax effects are being discussed, would reduce the amount of taxation on earnings.
Of the foreign exchange surrendered, 80 percent was compensated at 55 rubles per dollar and 20 percent at 90 rubles per dollar [0.8(55) + 0.2(90) = 62 rubles per dollar].
The ruble appreciated by approximately 27 percent in nominal terms in the interbank market, from approximately 144 rubles per dollar in May 1992 to approximately 113 rubles per dollar in June 1992. In the first half of June 1992, the ruble remained near the latter level, reaching a high of 112.3 rubles per dollar. This appreciation of the ruble, caused by heavy intervention in foreign exchange sales by central banking authorities, served to increase the effective tax on using official markets since it reduced the effective compensation of exporters.
Fifty percent of these proceeds was surrendered at the rate of 62 rubles per dollar and the other 50 percent was converted at the rate of 150 rubles per dollar. Therefore 0.5(62) + 0.5(150) = 106 rubies per dollar.
This rate is calculated as (150 – 106) /150. This computation assumes that the foreign exchange earnings net of surrender were sold at the interbank rate of 150 rubles per dollar.
These calculations are on marginal dollars earned. In practice, profit taxation is levied on revenues net of expenditures on production inputs.
The author appreciates the useful suggestion by Roger Gordon that Scenario E be included in this table.
IMF staff estimates.
“Previously” in this context refers to the period preceding both the heavy CBR intervention in foreign exchange markets and the unification.