Aim/purpose – The aim of this article is to present two cases of exchange rate controls
in Switzerland and Argentina. The paper also examines the problem of presence
and evaluation of shadow exchange rate in both countries.
Design/methodology/approach – The shadow exchange rates are estimated using
speculative pressure index concept that emphasizes the importance of not only exchange
rate movements but also changes in foreign exchange reserves as well as interest
rate differentials. The research sample covers Switzerland 2001-2016 and Argentina
2006-2016 (for shadow exchange rate simulation: 2011-2014 and 2011-2015, respectively).
Findings – The conclusions drawn from international experience and conducted
empirical analysis are positive. In both cases, shadow exchange rates were close to market
rates after the removal of controls. During the restrictions periods shadow rates followed
the intuition given by speculative pressure index concept (and by monetary approach,
simultaneously).
Research implications/limitations – The research suggests that market forces in
both countries were still able to restore exchange rates to market values after the period
of control. However, it is obvious that it is very difficult to prove that shadow rates were
always determined by economical forces and close to their long-term equilibrium values.
Originality/value/contribution – The original approach combines two important
economic concepts – the idea of shadow exchange rate and the methodology of index of
speculative pressure. Combined together they can help to analyze two interesting and
relatively new cases of foreign exchange controls in Switzerland and Argentina. The results can be valuable for economists, researchers and politicians who support or reject
the idea of controlling macroeconomic parameters in modern, open economy.
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