EconPapers    
Economics at your fingertips  
 

Smuggling, non-fundamental uncertainty, and parallel market exchange rate volatility

Richard Barnett ()

Canadian Journal of Economics, 2003, vol. 36, issue 3, 701-727

Abstract: We explore a model where smuggling and a parallel currency market arise, owing to government restrictions that prevent agents from legally holding foreign exchange. Despite such restrictions, agents are able to diversify their savings, holding both domestic and parallel foreign cash, basing their portfolio allocation on current and prospective parallel exchange rates. We attribute movements in parallel rates to non-fundamental uncertainty. The model generates equilibria with both positive and negative parallel premia and correlations between illegal trade and the premium. The model has the novel implication that currency speculation drives smuggling, affecting real activities in all sectors of the economy.

JEL-codes: F31 (search for similar items in EconPapers)
Date: 2003
References: Add references at CitEc
Citations: View citations in EconPapers (4) Track citations by RSS feed

Downloads: (external link)
https://doi.org/10.1111/1540-5982.t01-2-00009 (text/html)
access restricted to subscribers

Related works:
Journal Article: Smuggling, non‐fundamental uncertainty, and parallel market exchange rate volatility (2003) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cje:issued:v:36:y:2003:i:3:p:701-727

Ordering information: This journal article can be ordered from
https://www.economic ... ionen/membership.php

Access Statistics for this article

Canadian Journal of Economics is currently edited by Katherine Cuff

More articles in Canadian Journal of Economics from Canadian Economics Association Canadian Economics Association Prof. Werrner Antweiler, Treasurer UBC Sauder School of Business 2053 Main Mall Vancouver, BC, V6T 1Z2. Contact information at EDIRC.
Bibliographic data for series maintained by Prof. Werner Antweiler ().

 
Page updated 2021-08-15
Handle: RePEc:cje:issued:v:36:y:2003:i:3:p:701-727