The Determinants of Official and Free-Market Exchange Rates in Albania During Transition

Marta Muco, Harry Papapanagos (hp@uom.gr) and Peter Sanfey

Studies in Economics from School of Economics, University of Kent

Abstract: This paper uses high-frequency data to examine the relation between official and free-market exchange rates in Albania. We use daily data to test econometrically, first, whether the official and free markets are efficient, in the sense that one cannot use exchange rate movements denominated in one currency to predict movements in another currency, and second, whether movements in the free-market rate "cause" movements in the official rate. Our results provide support for the first proposition and partial support for the second. We also report the results of a unique survey of free-market dealers in Tirana, designed to determine the main factors that influence exchange rate movements. The evidence is that country-specific factors, in particular the large flows of illegal smuggling and emigrants' remittances, are more important than flunctuations in the international exchange market.

Keywords: Exchange Rates; Informal Market; Albania (search for similar items in EconPapers)
JEL-codes: F31 O17 (search for similar items in EconPapers)
Date: 1998-03
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Published in Journal of Comparative Economics, 1999, 27(3), pp.534-552

Downloads: (external link)
https://www.kent.ac.uk/economics/repec/9806.pdf (application/pdf)

Related works:
Journal Article: The Determinants of Official and Free-Market Exchange Rates in Albania during Transition (1999)
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:ukc:ukcedp:9806

Ordering information: This working paper can be ordered from
a.mitra@kent.ac.uk

Access Statistics for this paper

More papers in Studies in Economics from School of Economics, University of Kent School of Economics, University of Kent, Canterbury, Kent, CT2 7FS.
Bibliographic data for series maintained by Dr Anirban Mitra (a.mitra@kent.ac.uk).