TY - JOUR AU - Frenkel,Jacob A. AU - Razin,Assaf TI - Exchange-Rate Management Viewed as Tax Policies JF - National Bureau of Economic Research Working Paper Series VL - No. 2653 PY - 1989 Y2 - August 1989 UR - http://www.nber.org/papers/w2653 L1 - http://www.nber.org/papers/w2653.pdf N1 - Author contact info: Jacob Frenkel Dr. Jacob A. Frenkel Chairman, JPMorgan Chase International 270 Park Ave 46th floor New York, NY 10017 Tel: +1 212 270 2393 Fax: +1 212 270 2397 E-Mail: jacob.frenkel@jpmchase.com Assaf Razin Department of Economics Cornell University Uris 422 Ithaca, NY 14853 Tel: 607/255-9625 Fax: 607/255-2818 E-Mail: ar256@cornell.edu AB - The paper develops an analytical framework which demonstrates that the various forms of exchange-rate management are equivalent to corresponding tax policies. To highlight the salient issues, we consider two specific categories of exchange-rate policies. The first is a dual exchange-rate regime, which separates exchange rates for commercial and for financial transactions, and the second is a unified exchange-rate system in which the country unilaterally pegs its exchange rate at the same rate for all transactions. We show that the dual exchange rate policies can be usefully cast as distortionary taxes on international borrowing, and a unified pegged exchange-rate policies can be usefully cast as lump-sum tax cum subsidy policies. The equivalence between the various characteristics of exchange-rate management and tax management suggests that exchange-rate analysis could be usefully incorporated into the broader framework of the analysis of fiscal policies. A two-country model of the world economy is used to demonstrate the international transmission mechanism of these policies. ER -