ABSTRACT
In the great majority of liberalization episodes, countries added to their foreign-exchange reserves in the months immediately following the start of their program. Countries have embarked on trade liberalization in a wide variety of circumstances. A completely neutral trade regime is one that provides equal incentives to domestic sales and to exports. Thus, in principle, a trade regime with government intervention, but one that manages to provide equal incentive to exports and domestic sales, is a neutral one, as is a completely free trade regime with no government intervention. Some reforming countries have been much bolder than others, radically altering their trade regimes within a comparatively short span of time, rather than chipping away at reform over a period of many years. A real depreciation is, in effect, an increase in the price of tradeables relative to the price of non-tradeables. This relative price change should spur the production of tradeables, thus helping to boost exports.
