انعطاف‌پذیریِ نرخ اسمیِ ارز و تعدیل نرخ ارز: شواهد جدیدی از نرخ‌های دوگانه‌ی ارزی در کشورهای درحال توسعه

This study investigates whether greater nominal exchange rate flexibility aids real exchange rate adjustment based on data from dual exchange rates in developing countries. Specifically, we analyze whether the more flexible parallel market rate produces faster real exchange rate adjustment than the less flexible official rate does. Half-life estimates of adjustment speeds are obtained from fractional time series analysis. We find no systematic evidence that greater exchange rate flexibility tends to produce either faster or slower real exchange rate adjustment, albeit there is substantial cross-country heterogeneity in speed estimates. With official rates pegged to the dollar, many developing countries use parallel exchange markets as a back-door channel to facilitate real exchange rate adjustment. The evidence suggests, however, that these parallel markets often fail to speed up real rate adjustment.

The role of exchange rate flexibility in economic adjustment has long been a hotly contested issue. The issue brings back the old debate between Nurkse (1944) and Friedman (1953) on the stabilizing or destabilizing nature of speculation. According to Nurkse (1944), speculative exchange rate movements would tend to amplify and prolong disequilibria rather than accelerate economic adjustment. In contrast, Friedman (1953) suggested that it would be easier for the economy to adjust to shocks by securing needed changes in the real exchange rate through exchange rate than through price adjustment. Instead of fearing the instability flexible rates might bring, speculative forces could actually quicken exchange rate adjustment and hasten the equilibrating process. Since the move to the modern float, real exchange rate changes seem to have grown more persistent. As Rogoff (1996) observes, the speed of real exchange rate adjustment has been glacially slow among industrialized countries under the current float. The issue then arises as to whether greater nominal rate flexibility promotes real rate adjustment. In this study, we provide new alternative evidence on the issue in exchange rate flexibility based on a special set of data on dual exchange rates from developing countries. We do not analyze exchange rate flexibility in usual terms of exchange rate regimes (floating as opposed to fixed), but in terms of dual exchange rates (market-determined as opposed to government-set). Not only during the Bretton Woods (BW) period but also afterwards, parallel markets for foreign exchange – especially for the U.S. dollar – were common among developing countries. Unlike the official rate, which is fixed and occasionally reset by the relevant monetary authority, the parallel rate is determined by market supply and demand in which speculative forces can play a significant role. With limited access to the official exchange market, the parallel market serves to meet unsatisfied demand for foreign currency. Many developing countries use the dual exchange rate system as a tool to stabilize the real economy and to insulate real economic activity from the volatility of financial markets (Pozo and Wheeler, 1999). As noted by Reinhart and Rogoff (2004), parallel exchange rates provide a form of “back-door” floating in a lot of countries where an official peg is adopted. The spread between the parallel and the official exchange rate – referred to as the parallel market premium – often works as an indicator of exchange rate misalignments and has been used as a guide to realigning the official rate. According to Reinhart and Rogoff (2004), the parallel exchange rate is “a far better barometer of monetary policy than is the official exchange rate” and that the parallel market premium often correctly predicts realignments in the official rate and anticipates future official rate changes. Earlier studies of the parallel market premium (Dornbusch et al., 1983, Kamin, 1993, Montiel and Ostry, 1994 and Pozo and Wheeler, 1999) also suggest an important role for the expectations of future official rate changes in driving the premium. Ghei and Kamin (1999) recognize that the parallel exchange rate is a good, though not entirely perfect, proxy for the free-market currency value. To examine whether greater exchange rate flexibility leads to quicker real exchange rate adjustment, this study analyzes data on dual exchange rates for 24 developing countries. For each of these countries, a parallel market for foreign exchange exists alongside the official one during both BW and post-BW periods. With official and parallel rates being available for the same historical period, this special data set permits intra-period analysis. We can evaluate the relative adjustment speed of the real official and the real parallel rate for each country within a given time period. This minimizes the need to control for any inter-period differences in global and domestic economic conditions. Two questions of interest are: Do the official and the parallel market rate revert toward one another over time? Does the flexible parallel market rate bring about a faster speed of real exchange rate adjustment than the less flexible official rate? In addition to analyzing the difference in adjustment speed between real official and parallel rates on a country-by-country basis, this study also shows that the speed of adjustment for either rate can vary considerably across countries, even within the same historical period. A cross-section analysis will be conducted to evaluate how much the cross-country variation in adjustment speeds is attributable to structural differences in the corresponding economies.

A longstanding issue in exchange rate economics concerns whether greater nominal exchange rate flexibility promotes real exchange rate adjustment—an important channel through which an open economy adjusts to disturbances. Some economists consider nominal exchange rate flexibility to be important for macroeconomic adjustment by accelerating the realignment of the real exchange rate, while others hold the opposing view that free exchange rate movement may actually disrupt and prolong the real exchange rate adjustment process because speculative forces can send the nominal exchange off its equilibrating path. These contrasting views reflect the old Nurkse versus Friedman debate about exchange rate flexibility and the effect of speculation. In this study, we have analyzed whether the more flexible parallel market rate generates a faster speed of real exchange rate adjustment than the less flexible official rate does. We do observe substantially greater variability in parallel market rate changes than in official rate changes. Nonetheless, there is no significant evidence that greater nominal rate flexibility tends to yield faster real rate adjustment. Nor is there any significant evidence that greater nominal rate flexibility tends to produce slower real rate adjustment. In other words, based on the information from dual exchange rate systems, no systematic relationship can be found between nominal rate flexibility and the speed of real rate adjustment. The result holds for both the BW and the post-BW data. Many developing countries have used parallel exchange markets as a tool to adjust to economic shocks and external imbalances. When official exchange rate adjustment is limited, changes in real exchange rates need to come mainly through price changes. In these countries where an official peg to the dollar is adopted, the presence of an active parallel exchange market offers a back-door channel that may help facilitate real exchange rate adjustment. Although parallel exchange rates can move much more freely than official rates, parallel rate movements are, in most cases, not found to generate faster real exchange rate adjustment. The foregoing finding on relative adjustment speeds raises questions about the working of the parallel exchange market. A possible view may be that the parallel exchange rate tends to maintain a certain gap from the official exchange rate without bringing about a faster adjustment speed. The rate difference reflects, at equilibrium, the market price for restrictions associated with the official rate (the authors owe this point to an anonymous referee). Another possible view may be that strong speculative forces are at work in many parallel exchange markets, especially for short-term market movements. Currency traders can overreact to market shocks, thereby amplifying the short-term impact of these shocks on exchange rates. As a result, PPP deviations magnify first before diminishing. The rising importance of chartists in currency trading may further reinforce such overreacting behavior. When the market overreacts, it not only adds to the short-term volatility of the exchange rate but also prolongs the time it takes for the real rate to revert toward its long-run level. Accordingly, the parallel exchange market fails to produce significantly faster adjustment than the official exchange market. A final remark about the scope of our analysis is in order. The central question we examined is: If exchange rates were operating under similar economic conditions, would a more flexible rate generally produce faster or slower real rate adjustment than a less flexible rate? We did not attempt to make any general inferences about the difference in the speed of real exchange adjustment between economies with fixed exchange rates and those with floating rates. Countries with different exchange rate systems usually differ considerably in economic conditions, which can cause different real exchange rate dynamics. Even among economies having the same exchange rate regime, there can be substantial variation in real exchange rate adjustment behavior. The developing countries examined in this study are characterized as having largely a fixed exchange rate under the official IMF classification, and yet these countries still yield a wide range of speed estimates for real exchange rate adjustment. Moreover, the de facto exchange rate regime can be very different from the officially stated regime. Reinhart and Rogoff (2004) observe that, when a parallel exchange market exists, a regime of an official peg might easily turn out to be a de facto float or a crawling band. All these empirical issues make a general determination of the regime effect rather difficult. This brings us back to the reason why we do not analyze exchange rate flexibility in broader terms of exchange rate regimes (floating-rate regimes as opposed to fixed-rate regimes), but in more specific terms of dual exchange rates (market-determined parallel rates as opposed to pegged official rates). The latter approach provides a more controlled study of the adjustment dynamics of exchange rates with different flexibility. Our empirical evidence suggests that the market-determined parallel rate does not often adjust faster than the government-set official rate.