Lahore School of Economics

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What does the exchange rate do? “A status symbol?”

Sikander Rahim, Former World Bank


Devaluation of a currency in terms of foreign currencies or metallic standards was for long considered to be undesirable and, if unavoidable, a sign of failure. Attitudes have since changed and devaluation is thought to bring advantages, especially by making economies more competitive exporters. This paper is intended to show that it has disadvantages that outweigh any supposed advantages, notably its effects on inflation, income distribution, service on foreign debt and incentives. It does so by describing in concrete terms the relations between foreign and domestic prices and the costs of untradable goods and services that are components of the price of any good in any domestic price index. It also discusses te motives, official and unofficial, that have prompted the monetary authorities of Pakistan to make a practice of regular depreciation of the rupee and to question their justification.

About the presenter:

Sikander Rahim studied mathematics at Cambridge University, graduating with a BA in 1961, after which he studied economics there. He worked at the PIDE, the Economic Affairs Division and the Planning Commission before joining the World Bank staff as a country economist in 1978. He retired from the World Bank in 1997 and has since then been frequently associated with the Lahore School and has occasionally taught here.

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posted by S A J Shirazi @ 3/26/2014 01:00:00 PM,

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