Do Capital Inflows Cause Currency Black Markets in MENA? Causality Tests for Heterogeneous Panels

Osman Suliman

No 381, Working Papers from Economic Research Forum

Abstract: This paper examines feedback causality between capital inflow components and currency black market premiums (BMP) in a panel of eight Middle Eastern and North African countries (MENA) over the period 1984-2004. MFR and average Wald statistics approaches were employed to test for causality. Both approaches gave similar results. Causality results and policy implications are different for middle income, low income, and oil and non-oil countries. Interactions of capital inflow components and BMP with openness and human capital may act as mitigating factors, offsetting some capital outflows associated with currency crises.

Pages: 17
Date: 2008-01-01, Revised 2008-01-01
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Published by The Economic Research Forum (ERF)

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