What is Exchange Rate System

This chapter examines the evolution of macroeconomic policies in Cuba during the past 25 years. It analyzes the changes in fiscal policy from its wild gyrations in the early 1990s to the period of stability from 1994 to 2004, and to the crisis of 2008 and its sequel. It then examines the strategy of the Central Bank of Cuba and the tension between its anti-inflationary objective and its obligation to finance a substantial part of the fiscal deficit. It also emphasizes the need for new, modern instruments of monetary control, and the need to equip the central bank to become a lender of last resort. Finally, the chapter discusses the current multiple exchange rate system, its discriminatory nature, and its harmful effects on resource allocation, equity, and the interpretation of statistics.