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Cointegration analysis of the black market and official exchange rates in India

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  • Baghestani, Hamid
  • Noer, John
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    Abstract

    The examination of stochastic properties of the black market and official exchange rates in India reveals that the series are cointegrated and, therefore, possess a longrun equilibrium relation. The black rate is found to be more sensitive to shocks, and at the same time, adjusts more quickly to departures from the long-run equilibrium relation. This is expected, since the policy-determined official rate was set by what seems to be a sluggish and/or arbitrary mechanism, and that the black had to largely respond and adjust to the exogenous shocks in order to maintain the long-run equilibrium relation.

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    Bibliographic Info

    Article provided by Elsevier in its journal Journal of Macroeconomics.

    Volume (Year): 15 (1993)
    Issue (Month): 4 ()
    Pages: 709-721

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    Handle: RePEc:eee:jmacro:v:15:y:1993:i:4:p:709-721

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    Web page: http://www.elsevier.com/locate/inca/622617

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    Cited by:
    1. Costas Milas & Jesus Otero, 2000. "Modelling official and parallel exchange rates in Colombia under alternative regimes: a non-linear approach," BORRADORES DE INVESTIGACIÓN 003231, UNIVERSIDAD DEL ROSARIO.
    2. Bahmani-Oskooee, Mohsen & Miteza, Ilir & Nasir, A. B. M., 2002. "The long-run relation between black market and official exchange rates: evidence from panel cointegration," Economics Letters, Elsevier, vol. 76(3), pages 397-404, August.
    3. Kouretas, Georgios P. & Zarangas, Leonidas P., 2001. "Black and official exchange rates in Greece: an analysis of their long-run dynamics," Journal of Multinational Financial Management, Elsevier, vol. 11(3), pages 295-314, July.
    4. Diamandis, Panayiotis F., 2003. "Market efficiency, purchasing power parity, and the official and parallel markets for foreign currency in Latin America," International Review of Economics & Finance, Elsevier, vol. 12(1), pages 89-110.
    5. Shachmurove, Yochanan, 1999. "The Premium in Black Foreign Exchange Markets: Evidence from Developing Economies," Journal of Policy Modeling, Elsevier, vol. 21(1), pages 1-39, January.
    6. Ali Kutan, 1998. "Dynamics of parallel and official exchange rates: The experience of hungary," Atlantic Economic Journal, International Atlantic Economic Society, vol. 26(1), pages 54-65, March.
    7. Dockery, E. & Taylor, K., 1997. "Some tests on the long-run dynamics of black and official exchange rates: evidence for four East European countries," Journal of Multinational Financial Management, Elsevier, vol. 7(4), pages 317-332, December.
    8. Diamandis, Panayiotis F. & Drakos, Anastassios A., 2005. "Long-run dynamics of official and black-market exchange rates in Latin America," Global Finance Journal, Elsevier, vol. 15(3), pages 219-237, February.
    9. Bahmani-Oskooee, Mohsen & Goswami, Gour Gobinda, 2004. "Long-run nature of the relationship between the black market and the official exchange rates," Economic Systems, Elsevier, vol. 28(3), pages 319-327, September.
    10. Sovannroeun Samreth, 2010. "A Note on Short-Run and Long-Run Relationships between Parallel and Official Exchange Rates: The Case of Cambodia," Economics Bulletin, AccessEcon, vol. 30(2), pages 1044-1053.
    11. Subrata Ghatak & Jalal Siddiki, 2001. "The use of the ARDL approach in estimating virtual exchange rates in India," Journal of Applied Statistics, Taylor & Francis Journals, vol. 28(5), pages 573-583.

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