Dual Exchange Rate

Dual Exchange Rate

A situation in which a currency has two official exchange rates, one pegged to another currency and the other floating. Each is used for different things. The exchange rate for money used for sectors seen as essential, such as food, is fixed, while "non-essential" sectors are allowed to float. A dual exchange rate allows a country to devalue its currency to reflect market realities without the pain of high inflation that usually accompanies severe devaluation. Critics allege that a dual exchange rate is less efficient than a straightforward devaluation and acts as a tariff on industries the government sees as luxuries.
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This dual exchange rate policy is far more efficient than a general across-the-board subsidy to all imports, which is created by overvaluation.
In Nepal, Exporters' Exchange Entitlement Scheme, Dual Exchange Rate system, Seven Points Export Promotion Programs, Cash Subsidy were implemented after 1960 till 1992.
Following the government instituting a single unified exchange rate of 42,000 1 to the US$ in April, there has been a huge amount of pressure domestically to re-open the dual exchange rate system.
I vehemently criticised the 'dual exchange rate and trickle down economics' of Abacha through the press when the cronies of that regime collected billions of dollar from the Central Bank of Nigeria, CBN,at the exchange rate of 22 naira to a dollar and sold the dollars at 80 naira to a dollar in the open market.
In my opinion, the dual exchange rate constitutes a main drawback to any new or existing investment.
The directive was widely expected, as Valiollah Seif, the governor of the Cental Bank, has long said the dual exchange rate system would be ended soon after sanctions were lifted.
The measures devalue the strongest official exchange rate by 37 percent to 10 bolivars per dollar from 6.3, and streamline the previous three-tiered system into a dual exchange rate mechanism.
However, the dual exchange rate system was reintroduced again in 1985, when South Africa was faced with large-scale capital outflows.
The bolivar's depreciation, in conjunction with the government's H113 introduction of a dual exchange rate system, will have a tangible effect on the commercial real estate sector by curtailing business activity.
He said the government should have implemented a dual exchange rate; one for basic commodities and another for luxury goods.
The bolivar's depreciation, in conjunction with the government's H113 introduction of a dual exchange rate system in Venezuela, will have the most tangible effect on the Commercial Real Estate sector in the short term by curtailing business activity.
It extends the argument of the effects of flexible and fixed ERRs on fiscal discipline--as described by Tornell and Velasco (1998, 2000)--by adding a third ERR: dual exchange rate regime.

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