This book brings together a set of case studies of parallel foreign exchange systems, defined as systems in which a market-determined exchange rate, typically applying to financial transactions but often to a portion of trade transactions as well, coexists with one or more official, typically managed exchange rates. Such arrangements are extremely common among developing countries. At the end of 1993, 25 percent of the 158 developing country members of the International Monetary Fund (IMF) had separate official exchange rates for some portion (or all) of their capital account and/or invisible transactions. Fully 82 percent maintained restrictions on payments for capital account transactions and, of this group, 60 percent maintained restrictions on current transactions as well. Of the 100 developing countries listed in the World Currency Alert, nearly 20 percent had black markets with premia above 25 percent.
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