EXCHANGE-RATE REGIME REFORMS WITH BLACK-MARKET LEAKAGES

Many countries have multiple exchange rate regimes, with black or seco ndary currency markets operating alongside an exchange rate pegged or determined in interbank or auction markets. Leakages occur across thes e markets, necessitating careful analysis of the dynamic effects of nu merous policy instruments. Using a model with multiple exchange rates and leakages, we trace the dynamic effects on official and parallel fo reign exchange markets of exchange rate unification, changes in foreig n exchange surrender requirements, taxes on trade and capital account transactions, and official exchange rate devaluation. Simulations base d on Russia's recent experience demonstrate the qualitative importance of the results.