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Title: |
The Determinants of the Spread in the Black
Market for Dollars in Costa Rica |
| Author: |
Thornton, John |
| Author
Affiliation: |
IMF and U Wales |
| Source: |
International Economic Journal, Winter 1993, v. 7, no. 4, pp. 43-47 |
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Publication Date: |
Winter 1993 |
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Abstract: |
This note presents results from a time
series study of a version of the theory of the bid-ask spread in the
context of the Costa Rican black market for dollars using monthly
averages of daily data over the period January 1988 to September 1991.
The theory is tested by regressing the monthly average of daily spreads
on the interest rate and the monthly variance of the premium. The
results confirm the role of interest costs and inside information risk
and suggest that in the fact of an increased flow of buy orders for
dollars without a matching increase in sales, dealers respond by raising
the spread. |
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