Welfare Effects of Uzbekistan's Foreign Exchange Regime

An Application to the Thai Baht

Author: International Monetary Fund

In addition to transferring about 16 percent of GDP from exporters to importers, Uzbekistan's quasi-fiscal multiple exchange rate regime generates identifiable welfare losses of 2-8 percent of GDP on import markets and up to 15 percent on export markets. These excess burdens have increased substantially with the growing difference of exchange rates. The welfare analysis allows some conclusions regarding the optimal reform strategy: (i) welfare losses will decline overproportionally as exchange rates unify; (ii) exchange rate unification should be supplemented by changing the explicit fiscal system; (iii) at a minimum, Uzbekistan would benefit from moving to an explicit fiscal regime.

Volume/Issue: Volume 2000 Issue 061

Publication date: March 2000

ISBN: 9781451848168

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Topics covered in this book

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Business and Economics , Banks and Banking , Exports and Imports , WP , exchange rate , market , export , rate , Multiple Exchange Rates , Welfare Analysis , Quasi-Fiscal Operations , Uzbekistan , U , S , dollar , welfare loss , curb market premium , foreign exchange regime , import market , clearing exchange rate , Exchange rates , Exports , Market exchange rates

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Summary

In addition to transferring about 16 percent of GDP from exporters to importers, Uzbekistan’s quasi-fiscal multiple exchange rate regime generates identifiable welfare losses of 2-8 percent of GDP on import markets and up to 15 percent on export markets. These excess burdens have increased substantially with the growing difference of exchange rates. The welfare analysis allows some conclusions regarding the optimal reform strategy: (i) welfare losses will decline overproportionally as exchange rates unify; (ii) exchange rate unification should be supplemented by changing the explicit fiscal system; (iii) at a minimum, Uzbekistan would benefit from moving to an explicit fiscal regime.