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The Premium in Black Foreign Exchange Markets

Year: 1999

Type: article

Abstract: This paper examines the determinants of the premia between the black and official exchange rates using monthly data for 17 developing countries. The premium is hypothesized to be positively influenced by the official depreciation-adjusted interest rate differential and dollar value of domestic assets. It is hypothesized to be negatively influenced by the official real exchange rate, exports, and a seasonal factor associated with tourism. The countries studied are: Bangladesh, Brazil, Fiji, Gambia, Ghana, Guyana, Hungary, Ireland, Jamaica, Kenya, Nepal, Nigeria, Philippines, Somalia, South Africa, Uganda, and the former Yugoslavia. In general, the results are very supportive of the model. It is found that the interest rate differential and assets positively influence the premium, as is expected. The official real exchange rate is found to negatively influence the premium.

Source: Journal of Policy Modeling

DOI: 10.1016/s0161-8938(97)00091-4

Author: Yochanan Shachmurove

Institutions: City College of New York, City University of New York, University of Pennsylvania

Language: English

Topic: Monetary Policy and Economic Impact

Subfield: General Economics, Econometrics and Finance

Field: Economics, Econometrics and Finance

Domain: Social Sciences

Open Access status: hybrid

Estimated APC paid: $1,500

OpenAlex ID: W1549174422

FWCI: 1.737

Cites: 23

Cited by: 20

Related to: 10