Expectations and the Black Market Premium
Posted: 30 Jan 1998
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: Suggested Citation