{"title":"The path to kina convertibility: An analysis of Papua New Guineaʼs foreign exchange market","authors":"Martin Davies, Marcel Schröder","doi":"10.1002/app5.358","DOIUrl":null,"url":null,"abstract":"<p>Papua New Guinea (PNG) has faced a foreign exchange (forex) shortage since 2015. The Bank of PNG has resorted to forex rationing to protect reserves, leading to a large backlog of orders and import compression. This paper surveys the structure of PNGʼs forex market and analyses recent market conditions. We argue that a real exchange rate depreciation is required to restore currency convertibility. We develop a forex market model that features a backlog of unmet orders which suggests that a frontloaded depreciation is preferred to an often-favored gradual adjustment. Empirical results indicate that the governmentʼs large budget deficits have contributed to the forex shortage, highlighting the need for greater fiscal restraint. In the longer term, we argue for more exchange rate flexibility and forex allocation through competitive auction.</p>","PeriodicalId":45839,"journal":{"name":"Asia & the Pacific Policy Studies","volume":"9 3","pages":"465-482"},"PeriodicalIF":1.4000,"publicationDate":"2022-10-11","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"https://onlinelibrary.wiley.com/doi/epdf/10.1002/app5.358","citationCount":"0","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"Asia & the Pacific Policy Studies","FirstCategoryId":"90","ListUrlMain":"https://onlinelibrary.wiley.com/doi/10.1002/app5.358","RegionNum":3,"RegionCategory":"社会学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"Q1","JCRName":"AREA STUDIES","Score":null,"Total":0}
引用次数: 0
Abstract
Papua New Guinea (PNG) has faced a foreign exchange (forex) shortage since 2015. The Bank of PNG has resorted to forex rationing to protect reserves, leading to a large backlog of orders and import compression. This paper surveys the structure of PNGʼs forex market and analyses recent market conditions. We argue that a real exchange rate depreciation is required to restore currency convertibility. We develop a forex market model that features a backlog of unmet orders which suggests that a frontloaded depreciation is preferred to an often-favored gradual adjustment. Empirical results indicate that the governmentʼs large budget deficits have contributed to the forex shortage, highlighting the need for greater fiscal restraint. In the longer term, we argue for more exchange rate flexibility and forex allocation through competitive auction.
巴布亚新几内亚(PNG)自2015年以来一直面临外汇短缺。巴布亚新几内亚央行(Bank of PNG)已采取外汇配给制来保护外汇储备，导致大量订单积压，进口受到挤压。本文调查了巴布亚新几内亚外汇市场的结构，并分析了最近的市场状况。我们认为，恢复货币可兑换性需要实际汇率贬值。我们开发了一个外汇市场模型，该模型的特点是积压的未满足订单，这表明提前贬值比通常受欢迎的逐步调整更可取。实证结果表明，政府的巨额预算赤字是外汇短缺的原因之一，这凸显了加大财政约束的必要性。从长期来看，我们主张通过竞争性拍卖提高汇率灵活性和外汇分配。
期刊介绍：
Asia & the Pacific Policy Studies is the flagship journal of the Crawford School of Public Policy at The Australian National University. It is a peer-reviewed journal that targets research in policy studies in Australia, Asia and the Pacific, across a discipline focus that includes economics, political science, governance, development and the environment. Specific themes of recent interest include health and education, aid, migration, inequality, poverty reduction, energy, climate and the environment, food policy, public administration, the role of the private sector in public policy, trade, foreign policy, natural resource management and development policy. Papers on a range of topics that speak to various disciplines, the region and policy makers are encouraged. The goal of the journal is to break down barriers across disciplines, and generate policy impact. Submissions will be reviewed on the basis of content, policy relevance and readability.
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