World Development Report 1984

Box 3.4 Exchange rates and price adjustments: lessons from the
experience of developing countries
Xl-- rIo .-rnni-nt intr. -r ntr in ttin R. i: 1-- I imp. -rt had rt- . t" 14 per- - Iumrrd r,mont more than i practnt t: i
*s Ih.imgt rat.-.... -h, re;ulis are tat-r a h- .-nri and e.port had til 2 pr I thar 2 prer .i h--t it3n 'th
in,. ~'e-erl it. -. aiu,d rei .. e'.:haniciv cent Th~ r-r'ai ' .arc a ttmprarrl t3bie Iir c;.t the r iug-la ednim.
rart Ihere de hnvd a- t1u 'i mfdcre. iinanced r-. lari: capital ntl-o-- that aln¾',t it ice a; much in tern-'; t .im e-
I l prcee ;I- t,*r-it-n prices at t-n'.rald re;p,..nd1d to capt al mark-i deregitla- ti: res-'urceth to e3rn it ot tor txgn
ih prt . hlirn. nomimal nut II i tlt- rt tr-rcd e-chanec Ithr-. ugh inport *u. -ilutin
*hiri t- ur-.Ut-- ........ - ard 1 - ci: rtad-'d at.'j .1 ,ari te1l by 12 4 percenr T- --- alt than thr ugoih , \prtt
vt~:r' *r' and indu:e c t- dtmard ltr thr pr,announ:ed e\chan_ c rat.: p--It Turke% repre;:nt4 3n-ther intere;tling
imp- -rt fhc- recLiin, -hrirag .-i fcr- a .1- aban3Ncned Pt 1Li at--: ., a- .et t. rern e change
i4n -hiuatin nma. al t- irr rE and .ih. rlttc'liic brcught eco-
rti nlpg.ri-i nmp d Additir'r-.uI c-cciir -h-n gi:trnnieni' i-Hot-. the n'nmic r-'-v Ih to J hIall Rapid increart;
rncaura,r t i rat3-n r:-rvign changt e Iquiteo mimnoni p ot h-Idrne th. real in ihe prtice It'.el had tat ''utp3aed the
Tlh- p hli,i. r-udlie ettiC n-:i I\ .rtat- echang^-. r.lt mn-ranr ,n the pre- n-:- or rapid - opreciat'r -t ht lange te
in .n-rn:tie. I 1, In. ;'ilt r-- -urce, tc- ad er-, e.ernal *hack; Th- impl-. arIer 1 c-; anrd L-intinu:d ic- d- .' until
inr-irt -ub;vtutir.g act-tl rle. %- hil- d *--.n rt c t t-. underl r arl1 i F -npcund niarter ihe
requiret nir Im -rin: r'mu rt-uurce' ti 'rt iulibriint r,al cUhangrge rate alth'gh cOu"i1' iL an i-I ir--rF 'tler and ih, .il
a; unit -ti a. t :h n hanig - that- d- therE nc- ctmplt ru-latin beit%etn the pr.cc inmr.-ace AI l Q rtprr;c .ntcd an
it- rTiC and i1 2i ' tpeid .tais niag-ritm3 rde -.t c-* tmril :h .......-- A...... - arind li.e mi ad.3i-z-r-e d e17-' rt nr t-tm; ct tradt
d .-nit-ti ri. r-- -.n r--r n e-king - d t -:hingt r-rteia re e-ur i-ilntrltrin ak-nt ic- ome 2 perc,ni -it COr
the' prtrl protitai- otl'- acr I-t, n-Ip lit- urn ln -.- 'l main.- lamrt.r in ljanar, i o-rh r.'rm trt
prarn. parr ,r the rent tr--rn ac to: tamned a c,-n,lanr rerIl ectri'u tle r.r-tttd r;r-..:.orrtt the ituatn . ;
-heJp Oit r.itu-nt-di -m otrc t r-grr tI- underhln m equilibruim rait --a tall- ht .- n in thu tIt tire n-mra l31
| *- clr-lize mi, In I') the 'IUgL-;lda echanriae rite rcant r.tt d: pre aIttd 1.hatirl in the
i ei' Alutd 1- I-ihan ran-- .-an aribe. r in , m' torr i pccn -.Cr'-,aid hl I-" s ar- F6r atid m1l I reducing thu degr e
i rerali '. a l CI.-il': th- n--min 1-A lIar -a -tr alua .- n had tcac.Ich-:d 42 prc--nt . -1 -. e:r- ilu3tmi-ri h- . I It hut ii, -t.t lFi8
| clrt:hanlce til -ti.... p-tu;nnin~ a- and anrd ,urpas- -................ .lhan_e- raw- had 1 pit- l It. I ii en t raking r-tI accoun o the
tiedJ n lur.r 1"" 'a tll ani tm- cent -ut CFIP In t i) tht unrtr- t - -r - hinge f cede h-.auc- ot the .-. I Frice
-.a3,r .-iC ini-t..dr tpr -- mt Ilul. l ru I e nc-i a -r-- hrtr: range 'hi d-l * nr. te: ; e B, l-iSi Furklt,h .rc.-I ih
Fp-c 'mali--i il p.i-i ranou - in tL.n*Ltim r - ir . r-e.-pinc t. dN ric * \t rnal rr unritd and c xp.- 1i tIe,an irt-'- ing
F-ric - m' -rh I.lin bLr *a,ll high duon' ;- h. h t ihi:h an -- unit.t I - t ---* .. 3 r.a-idl-tIa rth~ -;h.in,. rait at a rtu3a1;t,c
milau .n th al r e
l~~~~~~~~~ra
m in tit r--.
rav
p'rctnt - 't DGEP durinng
pr:n .
-~l ur-'-, th ti II-.-el
l
Exchange rales and GDP growth in Yugoslavia and Turkey, 1976-83
C- -. -;-ud .z. r---' lrn! lu--~ iu- 19- -¾'i^ ';'Žl i m imm'a
\u.lgc-;lasiaI
L,I-hange rate = dinar; dollar; I> 2 1is. It n 1 I 24 3 3m 3 42 i
Nlar.el cl!arin, rat- 223i 2t1 4 22 r' 2b R 34
Qsyrt alu.atitn IFp- trentI 2 i I it 11 21 1 42 n ?j i
Inipi,rt ront; rIl'i i erct,I s I 4 '- 4 t 2
I'eal :DI ri-- ro th rate per--nt i 5 3 4 $ n r 3 2 I4 I -_ I
Turk -
E-L hange rite = Lira dollirs r1- I. lti t 24 3 31 1 I 1 1112 1-2 n 225
Marker clearinn rt- 31.3 -2 4 l3 ii 112'
C'% er%aluatn!r' Iprc:1-nti
Nlarket c-aring ratt %' ithout
t, n C -h 4 4Q 0 i 1 I 4
-:-il prica rise 3S 3 hIll "I r .I
Real C-P' 4r.nitlh rate ipercenti 7 4 3 2 I -] '4 -t!.- 44 4 I 1
r I. F crmnrate, ri. :na.le cl[ea-ne rate; percentage o en aluat l -n and tat. n le t-- ( n nl- in:
-- tercc r-~ Inc -E i] ntularthe uz-1s i-a nd Turkich c- -.n rmlecduring lLCr- ir an 1%ii V i ) rt -pclr t I-l
; rC-tl di amIaXbl
45