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Title: |
Efficiency of the Black Market for Foreign
Exchange |
| Author: |
Dowla, Asif |
| Author
Affiliation: |
St Mary's
College MD |
| Source: |
International Economic Journal, Summer 1995, v. 9, no. 2, pp. 89-100 |
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Publication Date: |
Summer 1995 |
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Abstract: |
A unique feature of the exchange rate
regimes in the developing countries is the coexistence of a parallel or
black market for foreign exchange along with the official market. In the
literature on black market exchange rate, however, there are no
discussions about whether these markets are efficient or not. In this
paper we examine if the black markets for foreign exchange are efficient
using data from several developing countries. Using Box-Pierce Q-test
and Dickey-Fuller test we show that for most of the countries included
in the sample, black market for foreign exchange are efficient. The
results have interesting policy implications. As the markets are
efficient, authorities should use the information provided by the black
market rates in deciding the level of the official exchange rate. |
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