Black and official exchange rates in the Pacific Basin countries: an analysis of their long-run dynamics

Kate Phylaktis · Yiannis Kassimatis

40 citations0/0 files storedApplied Economics

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Abstract

This paper examines the long-run dynamic relationship between black and official markets for seven Pacific Basin countries over the period 1974 to 1989. The evidence shows a long-run unit proportionality between the two rates, i.e. a constant long-run black-market premium. When the premium deviates from its long-run value, the black-market rate adjusts to eliminates the division. The speed of adjustment varies and seems to depend on the financial development of the country. Finally, there is evidence of weak-form informational inefficiency in the black markets.

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References

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