Expectations and the Black Market Premium

Posted: 30 Jan 1998

See all articles by Susan Pozo

Susan Pozo

Western Michigan University - Department of Economics

Mark Wheeler

Western Michigan University - Department of Economics

Abstract

The purpose of this paper is to gain a better understanding of the black market premium--the percent differential between the black market and official exchange rate. We test to see whether the black market premium responds to variations in expectations about the official exchange rate in Argentina, Brazil, Colombia and Mexico. We find that expectations of devaluation do cause movements in the black market premium for Argentina, Brazil and Mexico. This behavior is not observed for Colombia. Colombian economic agents seem less sensitive to expected returns. This perhaps explains the relatively flat black market premium series observed for Colombia.

JEL Classification: F31

Suggested Citation

Pozo, Susan and Wheeler, Mark, Expectations and the Black Market Premium. Available at SSRN: https://ssrn.com/abstract=71330

Susan Pozo (Contact Author)

Western Michigan University - Department of Economics ( email )

1903 West Michigan Avenue
Kalamazoo, MI 49008
United States
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269-387-5637 (Fax)

HOME PAGE: http://homepages.wmich.edu/~pozo/

Mark Wheeler

Western Michigan University - Department of Economics ( email )

Kalamazoo, MI 49008
United States

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