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Title: |
The Gravity Equation, Market Size, and Black
Market Exchange Rates |
| Author: |
Larue, Bruno;
Mutunga, Joshua |
| Author
Affiliation: |
U Laval;
Ministry of Finance, Kenya |
| Source: |
International Economic Journal, Summer 1993, v. 7, no. 2, pp. 61-75 |
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Publication Date: |
Summer 1993 |
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Abstract: |
In an attempt to test hypotheses about
black market exchange rates, market size, economic integration, and
several other variables, gravity models were estimated to explain trade
flows among less developed countries (LDCs), among developed countries (DCs),
from LDCs to DCs, and from DCs to LDCs. It was shown that distortions
attributable to black market exchange rates have a significantly
negative effect on the value of trade and that differences in per capita
income have an adverse effect on LDCs exports to DCs. Per capita income
and population contribute unevenly in creating market size effects
(i.e., productive and purchasing capacity) and the now-defunct East
African Community had a significant effect on "LDCs to LDCs" trade. |
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