This paper uses high-frequency data to examine the relation between official and free-market exchange rates in Albania. We use daily data to test econometrically, first, whether the official and free markets are efficient, in the sense that one cannot use exchange rate movements denominated in one currency to predict movements in another currency, and second, whether movements in the free-market rate "cause" movements in the official rate. Our results provide support for the first proposition and partial support for the second. We also report the results of a unique survey of free-market dealers in Tirana, designed to determine the main factors that influence exchange rate movements. The evidence is that country-specific factors, in particular the large flows of illegal smuggling and emigrants' remittances, are more important than flunctuations in the international exchange market.
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Publisher Info
Paper provided by Department of Economics, University of Kent in its series Studies in Economics with number
9806.
Length: Date of creation: Mar 1998 Date of revision: Publication status: Published in Journal of Comparative Economics, 1999, 27(3), pp.534-552 Handle: RePEc:ukc:ukcedp:9806
Contact details of provider: Postal: Department of Economics, University of Kent at Canterbury, Canterbury, Kent, CT2 7NP Phone: +44 (0)1227 764000 Fax: +44 (0)1227 827850 Web page: http://www.ukc.ac.uk/economics/
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Find related papers by JEL classification: F31 - International Economics - - International Finance - - - Foreign Exchange O17 - Economic Development, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
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