Mohsen Bahmani-Oskooee () (University of Wisconsin-Milwaukee) Gour Goswami () (North South University-Bangladesh) Ilir Miteza () (University of Michigan-Dearborn)
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Many of the previous studies that tried to assess the contractionay or expansionary effects of depreciations or devaluations in less developed countries (LDCs) used official exchange rate data and concluded that devaluations are contractionary in LDCs. However, due to capital controls, there is a black market for foreign exchange in many of the LDCs. In this paper when we use black market rates over the period 1975-1998 from 29 LDCs in a panel model, we find that devaluations are expansionary. Thus, for an effective exchange rate policy the official and black market exchange rates should be unified.
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Article provided by Economics Bulletin in its journal Economics Bulletin.
Find related papers by JEL classification: F3 - International Economics - - International Finance F3 - International Economics - - International Finance