Is Black Market Exchange Rate a Good Indicator of Equilibrium Exchange Rate? A Simple Test With Evidence From South Asia
AbstractThe black market exchange rate premium is widely used in the empirical literature as an indicator of trade and exchange rate distortions. This paper presents a simple test of the null hypothesis that the black market exchange rate is a reliable indicator of the equilibirum exchange rate. The evidence from India and Sri Lanka rejects the null, and thus raises serious doubts about the validity of the current empirical practice.
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Bibliographic InfoPaper provided by EconWPA in its series Development and Comp Systems with number 0406005.
Length: 8 pages
Date of creation: 21 Jun 2004
Date of revision: 21 Jun 2004
Note: Type of Document - pdf; pages: 8
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Black market exchange rate; Equilibrium exchange rate; Black market exchange premium; India; Sri Lanka; Growth Regressions;
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