Macroeconomic management and the black market for foreign exchange in Sudan

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Macroeconomic management and the black market for foreign exchange in Sudan, Volume 1

Author:	Elbadawi, Ibrahim A.;	Collection Title:	Policy, Research working papers ; no. WPS 859. Macroeconomic adjustment and growth
Country:	Sudan;	Date Stored:	2001/04/26
Document Date:	1992/02/29	Document Type:	Policy Research Working Paper
Language:	English	Major Sector:	(Historic)Economic Policy
Region:	Africa	Report Number:	WPS859
Sub Sectors:	Macro/Non-Trade	SubTopics:	Achieving Shared Growth; Economic Stabilization; Economic Theory & Research; Macroeconomic Management; Foreign Trade Promotion and Regulation
Volume No:	1

Summary: The author uses a simple general equilibrium model to derive a forward-looking linear solution for the premium on the black market for foreign exchange in Sudan. His solution accounts for the long-run fundamentals of the premium that operate through the current account balance. It also accounts for the short-run determinants of the asset market. Estimates based on Sudanese data broadly corroborate the model's predictions. The author's thesis is that successful exchange rate unification and subsequent integration of the parallel market into Sudan's regular economy will require deep fiscal reform and liberalization of trade and exchange rate policies tailored to the pace of macroeconomic reform. His results show that controlling inflation becomes more difficult under high-premium regimes and that higher premiums hurt official exports and tax revenue from foreign trade. A high premium also tends to accelerate capital flight.


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