Onour, Ibrahim (2010): South Sudan Referundum: A Macroeconomic Analysis of Post-Secession Scenario.
Download (230Kb) | Preview
The purpose of this paper to analyse financial stability in small open economy, with dual foreign exchange markets, enduring political uncertainty and facing the likelihood of perminant adverse export shock. The finding in the paper indicate, given capital outflow is maintained at minimal level, there exist stable equilibrium exchange rates, despite the adverse export shock. However, for the foreign exchange market to adjust more quickly towards a new steady state equilibrium the central bank need to build sufficient foreign exchange reserves. If the reserve level remains at low levels the recovery process from the adverse shock will take longer time, as periodic devaluation of the official rate remain the only available tool for the central bank. When expanding fiscal deficit and declining official reserves force the government adopting a floating exchange rate system, our model predict depreciation of foreign exchange rate is identical to domestic money growth.
|Item Type:||MPRA Paper|
|Original Title:||South Sudan Referundum: A Macroeconomic Analysis of Post-Secession Scenario|
|English Title:||South Sudan Referundum: A Macroeconomic Analysis of Post-Secession Scenario|
|Keywords:||parallel rate; official rate; Stability; Steady-state|
|Subjects:||E - Macroeconomics and Monetary Economics > E0 - General
C - Mathematical and Quantitative Methods > C0 - General > C02 - Mathematical Methods
E - Macroeconomics and Monetary Economics > E4 - Money and Interest Rates > E44 - Financial Markets and the Macroeconomy
|Depositing User:||A Onour|
|Date Deposited:||06. Apr 2011 22:33|
|Last Modified:||16. Feb 2013 02:47|
Dornbusch, R., Pechman, D., Rocha, R., and Simoes, D., “The Black Market for Dollars in Brazil,” Quarterly Journal of Economics, 98, Feb. 1983, 25-40. Edwards, S., Real Exchange Rates, Devaluation and Adjustment: Exchange Rate Policy in Developing Countries (Cambridge, Mass., MIT Press, 1989). Gros D., “Dual Exchange Rate in the Presence of Incomplete Market Separation: Long-Ran Effectiveness and Implications for Monetary Policy” IMF, WP/87/45,1987 Jadgeep B., Vegh C., “Dual Exchange Markets Under Incomplet Separation: An Optimizing Model,” IMF Staff Papers, Vol. 37, No.1 March 1990. Kharas, H., and Pinto, B., “Exchange Rate Rules, Black Market Premia, and Fiscal Deficits: The Bolivian Hyperinflation,” Review of Economic Studies, 56, July 1989, 435-47. Kiguel, M., O’Connell, S., “Parallel Exchange Rate in Developing Countries.” The World Bank Research Observer, Vol. 10, No.1, Feb. 1995, 21-52. Lizondo, J. S., “Unification of Dual Exchange Market,” Journal of International Economics, 22, Feb. 1987, 57-77. Onour, I., and Cameron, N., “Parallel Market Premium and Real Official Exchange Rate Misalignment,” Journal of Economic Development, Volume 22, Issue No.1, 1997, 25-41. Onour, I., “Unification of Dual Foreign Exchange Markets” Economics of Planning (Journal),33, 171-184, 2000. Rodriguez, C., “A Stylized Model of the Devaluation-Inflation Spiral” IMF Staff Papers, 25 , 1978, 76-89. Pinto B., “Black Market Premia, Exchange Rate Unification and Inflation In Sub-Saharan Africal” World Bank Economic Review, 3, Sep. 1989, 321-38. ------, “Black Markets for Foreign Exchange, Real Exchange Rates, and Inflation” Journal of International Economics,” 30, March 1991, 121-35. Kant, C., (2002) “What is Capital Flight?, The World Economy, Vol.22, Issue 2, pp.341-358.