Abstract
Pinto (1990) in World Bank Economic Review 3, 321-338, showed that unification of official and 'parallel' market exchange rates may lead to an increase in steady-state inflation, because of the fiscal impact of real official exchange rate changes. This paper shows how this, and other comparative static and stability results in Pinto (1990), are reversed under the assumption that official exchange rate devaluation reduces money creation in the economy. It is argued that this was the case for Uganda in the 1980s, and we give a simple rule of thumb for estimating when unification will increase or decrease steady-state inflation.
Original language | English (US) |
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Pages (from-to) | 295-316 |
Number of pages | 22 |
Journal | Journal of Development Economics |
Volume | 46 |
Issue number | 2 |
DOIs | |
State | Published - Apr 1995 |
All Science Journal Classification (ASJC) codes
- Development
- Economics and Econometrics
Keywords
- Exchange rate
- Inflation
- Parallel market