Is Black Market Exchange Rate a Good Indicator of Equilibrium Exchange Rate? A Simple Test With Evidence From South Asia

M. Shahe Emran and Forhad Shilpi

Development and Comp Systems from University Library of Munich, Germany

Abstract: The black market exchange rate premium is widely used in the empirical literature as an indicator of trade and exchange rate distortions. This paper presents a simple test of the null hypothesis that the black market exchange rate is a reliable indicator of the equilibirum exchange rate. The evidence from India and Sri Lanka rejects the null, and thus raises serious doubts about the validity of the current empirical practice.

Keywords: Black market exchange rate; Equilibrium exchange rate; Black market exchange premium; India; Sri Lanka; Growth Regressions (search for similar items in EconPapers)
JEL-codes: O P (search for similar items in EconPapers)
Pages: 8 pages
Date: 2004-06-21, Revised 2004-06-21
Note: Type of Document - pdf; pages: 8
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Persistent link: https://EconPapers.repec.org/RePEc:wpa:wuwpdc:0406005

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