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Exchange Control, Liberalization, And Economic Development, Jagdish N. Bhagwati, Anne O. Krueger

Faculty Scholarship

This paper highlights results of the National Bureau of Economic Research's (NBER) research project on exchange control, liberalization and economic development from 1970-1973. Initial adoption of exchange controls was generally an ad hoc response to external events. The optimal resource allocation dictum – that the marginal cost of earning foreign exchange should be equated with the marginal cost of saving foreign exchange – was generally abandoned in favor of saving foreign exchange at all costs. An export-oriented development strategy generally entails relatively greater use of indirect, rather than direct, interventions. There is considerable evidence from the individual country studies that …