Click here for search results
Parallel markets, the foreign exchange auction, and exchange rate unification in Zambia, Volume 1
 
Author:Aron, Janine; Elbadawi, Ibrahim A.; Collection Title:Policy, Research working papers ; no. WPS 909. Macroeconomic adjustment and growth
Country:Zambia; Date Stored:2001/04/18
Document Date:1992/05/31Document Type:Policy Research Working Paper
Language:EnglishMajor Sector:(Historic)Economic Policy
Region:AfricaReport Number:WPS909
Sub Sectors:Macro/Non-TradeSubTopics:Environmental Economics & Policies; Macroeconomic Management; Economic Theory & Research; Economic Stabilization; Fiscal & Monetary Policy
Volume No:1  

Summary: A large thriving parallel market for foreign exchange has coexisted with a rich menu of official exchange rate policies aimed at achieving a more flexible exchange rate and price system as well as financial and trade liberalization. Despite aggresive policies in these areas, particularly for the exchange rate, the black market premium (defined as the ratio of the black market rate to the official rate) remains high. The authors examine the origins of the parallel market, the statistical properties of the parallel premium, and the shocks and macroeconomic policy changes that influence its evolution. Using annual data, they specify and estimate and eclectic error-correction model for the premium. They find that the large parallel market might have caused problems in macroeconomic management and economic reform. Also, the findings show that foreign inflation and depreciation of the black market rate (in a cost-push manner) directly increases domestic inflation. The authors conclude that exchange rate reform without fiscal reform may be futile and that it is important to liberalize major trade and financial markets in such a way as to compress the parallel market and prevent the premium from serving as a major signal to the economy.

Official Documents
Official, scanned versions of documents (may include signatures, etc.)
File TypeDescriptionFile Size (mb)
PDF 122 pagesOfficial version*8.54 (approx.)
TextText version**
How To Order

* The official version is derived from scanning the final, paper copy of the document and is the official,
archived version including all signatures, charts, etc.
** The text version is the OCR text of the final scanned version and is not an accurate representation of the final text.
It is provided solely to benefit users with slow connectivity.



Permanent URL for this page: http://go.worldbank.org/BVK6KVH7D0