European Dual Exchange Rates
In the early 1970s, many European countries faced a difficult predicament. Uniform fixed exchange rates allowed speculative capital movements to deliver large international reserve fluctuations, yet abandoning fixed exchange rates in favor of flexible rates could possibly deliver large exchange rate fluctuations that would disrupt trade. Between 1971 and 1974, several European countries, such as Belgium, France, and Italy, used a dual exchange market as a temporary middle-ground between the fixed and flexible rate extremes. Such an arrangement involved the formal establishment of separate exchange markets, with separate exchange rates, for current and capital account transactions.
KeywordsExchange Rate Interest Rate Exchange Market Trade Credit Foreign Asset
Unable to display preview. Download preview PDF.
- Bhagwati, Jagdish N. (1964) ‘On the Underinvoicing of Imports’, Bulletin of the Oxford University Institute of Statistics, vol. 26, no. 4, pp. 389–97.Google Scholar
- (Also in Bhagwati, J. (ed.) (1974) Illegal Transactions in International Trade (Amsterdam: North-Holland).)Google Scholar
- Bindert-Bogdanowicz, C. (1979) ‘The Dual Exchange Rate System’, Revue de la Banque Bruxelles, June.Google Scholar
- Fleming, J. Marcus (1971) ‘Dual Exchange Rates for Current and Capital Transactions: a Theoretical Examination’, in J. Marcus Fleming (ed.), Essays in International Economics (Cambridge, Mass: Harvard University Press), pp. 296–325.Google Scholar
- Flood, Robert, P. and Nancy P. Marion (1989) ‘Risk Neutrality and the Two-tier Foreign Exchange Market: Evidence from Belgium’, Working Paper No. 89/83 (Washington, DC: IMF).Google Scholar
- Frenkel, Jacob and Assaf Razin (1986) ‘The Limited Viability of Dual Exchange-rate Regimes’, Working Paper No. 1902 (Cambridge, Mass.: National Bureau of Economic Research).Google Scholar
- Ghei, Nita and Miguel A. Kiguel (1992) ‘Dual and Multiple Exchange Rate Systems in Developing Countries: Some Empirical Evidence’, Policy Research Working Paper Series No. 881 (Washington, DC: World Bank).Google Scholar
- Giavazzi, Francisco and Alberto Giovannini (1989) Limiting Exchange Rate Flexibility: the European Monetary System (Cambridge, Mass: The MIT Press).Google Scholar
- International Monetary Fund (various years) Exchange Arrangements and Exchange Restrictions (Washington, DC: International Monetary Fund).Google Scholar
- International Monetary Fund (various years) International Financial Statistics (Washington, DC: International Monetary Fund.Google Scholar