Bhagwati Jagdish N. author Columbia University. Economics Columbia University. Political Science Krueger Anne O. author Columbia University. Economics originator text Articles 1973 English 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 direct intervention may be considerably more costly than is generally recognized. Export rebates, tariffs, surcharges, import entitlement schemes, and a host of other devices are generally employed under quantitative restrictions regimes, and they lead to a wide dispersion in effective exchange rates by commodity categories. The effect of liberalization is often to induce a recessionary tendency rather than the traditionally feared inflationary impact. Even when there is a single domestic price for the imported good, the method of license allocation makes an important difference to resource allocation and income distribution. Economics 63 2 419 427 1973-05 http://hdl.handle.net/10022/AC:P:14782 NNC NNC 2012-09-27 14:09:05 -0400 2012-09-27 14:14:49 -0400 8790 eng