Exchange Controls and Parallel Market Economies in Sub-Saharan Africa: Focus on Ghana

摘要

The paper provides a theoretical framework to understand the way in which exchange controls modify the behavior of the different agents in the economy, leading to the creation of a parallel economy. It gives the necessary theoretical elements to analyze this parallel economy and provides a simple methodology to obtain relevant quantitative information about it. Finally, it elaborates some of the policy implications of the existence of such an economy. The model developed shows that parallel market activities can be explained through the optimizing behavior of exporters and importers. Exporters will keep shifting their exports from official to parallel market channels until the expected marginal benefit in both activities is the same. Import traders will devote resources to rent-seeking activity until the moment in which an additional unit spent in this activity is equal to the savings derived from being able to use official channels instead of the parallel markets. (Copyright (c) 1985, The International Bank for Reconstruction and Development.)