Abstract:
Stringent regulatory foreign exchange and trade policies create distortions and lead
to mis-invoicing of imports and exports. Such legally prescribed opportunistic
behavior is alleged to be common in LDCs because of their lack of openness and
restrictive policies. This paper focuses on the impact of various trade and currency
policies like tariffs, quotas, different exchange rates, and devaluation and adminis trative policy instruments like monitoring and penalties on import mis-invoicing
under Cournot quantity competition. A framework is developed to analyze the
impact of those policies on importers and domestic producers both under fixed and
flexible exchange rate regimes.
