Shadow Price of Foreign Exchange
Foreign exchange has emerged as a scarce resource for developing countries, as these nations face multiple problems of balance of payment. As a result, the demand price is greater than the official price of the foreign exchange. At this point, a cost-benefit analyst needs to decide whether the price of imports and exports is to be valued at the nominal price or the adjusted price. Most economists believe that pricing should be adjusted upwards for both exports and imports, so that the adjusted price complies with the scarcity value, which is reflected by the demand price of foreign exchange.
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