DO CAPITAL INFLOWS CAUSE CURRENCY BLACK MARKETS IN MENA COUNTRIES? CAUSALITY TESTS FOR HETEROGENEOUS PANELS

Osman Suliman

Applied Econometrics and International Development, 2013, vol. 13, issue 1, 187-202

Abstract: This paper tests 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. Because of the high likelihood of heterogeneity in the data set, Mixed-Fixed Random Effects (MFR) and average Wald statistic approaches are employed in the analysis. Causality results and policy implications are different for middle income and low income countries. The interaction of capital inflow components and BMP with openness and human capital may act to mitigate the capital outflow associated with currency crises.

Keywords: capital inflow; currency black market; causality; MFR; Wald statistics (search for similar items in EconPapers)
JEL-codes: C33 F3 (search for similar items in EconPapers)
Date: 2013
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