Currency Diversification and Export Competitiveness: A Model of the "Egyptian Disease" / Jorge Braga de Macedo.

Format:

Book

Author/Creator:

Braga de Macedo, Jorge.

Contributor:

National Bureau of Economic Research.

Series:

Working Paper Series (National Bureau of Economic Research) no. w0776.

NBER working paper series no. w0776

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Other Title:

Currency Diversification and Export Competitiveness

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 1981.

Summary:

The paper presents a dynamic portfolio model under currency inconvertibility which rationalizes the recent Egyptian experience of real exchange rate appreciation and currency diversification following the increase in oil exports and the partial financial liberalization that took place after 1976. The two shocks are linked because the relative price of manufacturing exports in terms of oil is also the premium of the black market rate over the official exchange rate. The effects of various official exchange rate policies on the temporary equilibrium values of the premium and the real wage and on the steady-state values of asset stocks are examined. A review of the Egyptian experience shows that as the model suggests the official devaluation of 1979 was ineffective against the "Egyptian disease" so that little can be expected from the 1981 devaluation. In light of the model results, a crawling peg policy is proposed instead.

Notes:

Print version record

October 1981.