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The true shadow price of foreign exchange

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  • Richard Dusansky
  • David Franck
  • Nadeem Naqvi

Abstract

For the last half century, trade theorists, development economists, and development practitioners have been calculating what was claimed to be the shadow price of scarce foreign exchange. In fact, what they have been calculating is the social value of the receipt of a unit of a numeraire good from abroad, typically obtained from real models. In our paper, we explicitly deal with a model of a monetized economy, and we develop formulas for the social value of a unit of foreign currency, which, in general, differ from the traditional formulas. Copyright Springer 2000

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  • Richard Dusansky & David Franck & Nadeem Naqvi, 2000. "The true shadow price of foreign exchange," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 24(2), pages 206-214, June.
    • Handle: RePEc:spr:jecfin:v:24:y:2000:i:2:p:206-214
    DOI: 10.1007/BF02752713
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    References listed on IDEAS

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    8. Bhagwati, Jagdish N & Wan, Henry, Jr, 1979. "The "Stationarity" of Shadow Prices of Factors in Project Evaluation, with and without Distortions," American Economic Review, American Economic Association, vol. 69(3), pages 261-273, June.
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    Cited by:

    1. David Franck & Nadeem Naqvi, 2000. "LDCs, International Capital Mobility and the Shadow Price of Foreign Exchange under Tariffs and Quantitative Restrictions," Journal of Economic Development, Chung-Ang Unviersity, Department of Economics, vol. 25(2), pages 43-54, December.

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