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Trend Breaks and Seasonality in the Yugoslav Black Market for Dollars, 1974-1987

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  • John Dawson
  • Steven Millsaps
  • Mark Strazicich

Abstract

We estimate a model of the black market premium for dollars in Yugoslavia from 1974-1987. Unlike previous applications of the model, our analysis addresses nonstationarity in the underlying data by allowing for trend breaks. Endogenous structural break tests indicate the presence of breaks closely associated with the death of Tito and changes in laws affecting the operation of the black market. After accounting for these breaks, we find strong support for the underlying model. In addition, we find evidence consistent with the era of increased government involvement in the black market leading to greater volatility of the premium following regime change.

Suggested Citation

  • John Dawson & Steven Millsaps & Mark Strazicich, 2004. "Trend Breaks and Seasonality in the Yugoslav Black Market for Dollars, 1974-1987," Working Papers 04-04, Department of Economics, Appalachian State University, revised 2005.
  • Handle: RePEc:apl:wpaper:04-04
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    References listed on IDEAS

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    6. Lee, Junsoo & Strazicich, Mark C, 2001. " Break Point Estimation and Spurious Rejections with Endogenous Unit Root Tests," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 63(5), pages 535-558, December.
    7. 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.
    8. Vogelsang, Timothy J & Perron, Pierre, 1998. "Additional Tests for a Unit Root Allowing for a Break in the Trend Function at an Unknown Time," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 39(4), pages 1073-1100, November.
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    11. Strazicich, Mark C. & Lee, Junsoo & Day, Edward, 2004. "Are incomes converging among OECD countries? Time series evidence with two structural breaks," Journal of Macroeconomics, Elsevier, vol. 26(1), pages 131-145, March.
    12. Junsoo Lee & Mark C. Strazicich, 2003. "Minimum Lagrange Multiplier Unit Root Test with Two Structural Breaks," The Review of Economics and Statistics, MIT Press, vol. 85(4), pages 1082-1089, November.
    13. Mohsen Bahmani-Oskooee & Gour G. Goswami, 2005. "The Impact of Corruption on the Black Market Premium," Southern Economic Journal, Southern Economic Association, vol. 71(3), pages 483-493, January.
    14. Bollerslev, Tim, 1986. "Generalized autoregressive conditional heteroskedasticity," Journal of Econometrics, Elsevier, vol. 31(3), pages 307-327, April.
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    16. 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.
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