Zimbabwe’s Black Market for Foreign Exchange
AbstractThis paper looks into the changes of the black market premium for foreign exchange in Zimbabwe. Generally, the black market for foreign exchange arises as a direct consequence of the adoption of exchange rate controls in many developing economies facing substantial macroeconomic imbalances. Despite its negative impact on Zimbabwe’s economy, this market has not, so far, attracted the attention of researchers. The research attempts to describe the functioning of the black market and find out the determinants of the parallel premium based on a stock-flow model as well as to investigate whether inflation Granger causes the parallel exchange rate. Estimated results reveal that the determinants of the black market premium are international foreign reserves, real exchange rate, lagged values of the black market premium, expected rate of devaluation, money supply and inflation. On the other hand, inflation and black market are found to Granger-cause each other during the period under consideration.
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Bibliographic InfoPaper provided by University of Pretoria, Department of Economics in its series Working Papers with number 200713.
Length: 39 pages
Date of creation: Jul 2007
Date of revision:
Black Market Exchange Rate; Black Market Premium; Foreign Exchange Controls; Cointegration; Granger Causality;
Find related papers by JEL classification:
- F31 - International Economics - - International Finance - - - Foreign Exchange
- C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
This paper has been announced in the following NEP Reports:
- NEP-AFR-2007-11-17 (Africa)
- NEP-ALL-2007-11-17 (All new papers)
- NEP-CBA-2007-11-17 (Central Banking)
- NEP-IFN-2007-11-17 (International Finance)
- NEP-MON-2007-11-17 (Monetary Economics)
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- Makochekanwa, Albert & Kwaramba, Marko, 2010. "Dwindling access to basic services in Zimbabwe," MPRA Paper 28271, University Library of Munich, Germany.
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