Emprical Determination of The Parallel Currency Market Preminum In Nigeria
Keywords:
Black market, foreign exchange market, parallel marke, NigeriaSynopsis
This study focuses on the provision of both theoretical foundations and empirical evidence on the parallel market premium in Nigeria. The parallel market premium was traced to the variations in major macroeconomic variables in the economy.
The increase in the parallel market premium observed after the introduction of economic reforms in Nigeria, in 1986, bad adverse effects on all the sectors of the economy. Structural and monetary models of parallel market premium were constructed in this work covering the period of 1987 to 1993. Quarterly data was used to examine the impact of structural and
monetary variables on the premium. The models were estimated using the ordinary least square (OLS) method of estimation.
The main findings of the study include among others, the existence of a structural relationship between the direction of exports and the premium; a low tariff rate which will reduce the level of parallel market premium, and a more gradual approach to the liberalisation of the exchange rate so as to discourage the widening of the gap between the official and the parallel
exchange rates, that is, the premium. Our empirical results confirmed Ansu (1991) and, Ghei and Kiguel (1992) argument about the relationship between money stock and the parallel market premium, i.e. money stock has a positive relationship with the parallel market premium. The obvious policy implication is that, for a unification of the foreign exchange rates, devaluation which is inflationary in consequence should be gradual while emphasis should be placed on a strict monetary and fiscal
Downloads
Download data is not yet available.
References
Agenor, P.R. (1990); "Stabilization policies in developing countries with a parallel market for foreign exchange" IMF staff papers 37, pp 560 -592.
Agenor, P.R. (1990) "Parallel Currency Markets in Developing Countries:Theory, Evidence and policy implications" Working Paper No 90/84,IMF, December.
Agenor, P.R. (1991) "A Monetary Model of the Parallel Market for Foreign Exchange" Journal of Economic Studies, Vol. 18, pp 4 - 1.
Agenor, P.R. and R.P. Flood (1992), "Unification of Foreign Exchange markets" International Monetary Fund working Paper No 92/312,
Washington, D.C, May.
Aifbokhan, B.E. (1991) "The Nairn Exchange Rate Depreciation and Domestic Inflation" The Indian Journal of Economics. Vol LXX:1,
Part IV, No 283, Aplil.
Ajakaiye, D.O. (1991) "Exchange Rate Depreciation and Sectoral Prices in Nigelia" Report of Individual Research Project, 1989, NISER.
Akinmoladun, 0. ( 1990) "An Appraisal of Foreign exchange Management (In Nigeria) Since the Introduction of Structural Adjustment
Programme" Paper presented at the Nigelian Economic Society, One day seminal on Foreign Exchange Management under S.A.P., Lagos, Aplil.
Aluko, S. (1988), "The Changing Value of the Nairn, "Management in Nigelia March/Aplil, pg. 7.
Ansu, Y. (1991) "Macroeconomic Aspects of Multiple Exchange Rate Regimes: The case of Ghana" Unpublished, The World Bank,
Washington DC.
Aron and I Elbadawi (1992) "Parallel Markets, The Foreign Exchange Auction, and Exchange Rate Unification in Zambia. World Bank
Staff Working papers, Washington D.C.
Asogu, J.O. (1991), "An Econometric Analysis of the Nature and Causes of Inflation in Nigeria "CBN Economic and Financial Review, vol 29, No.3.
Barth, R. (1992), "Exchange Rate Policy" in Macroeconomic Adjustment Policy Instrument and Issues (Washington: IMF Institute, 1992).
Bhagwati, J (1978): Anatomy and Consequences of Exchange Control Regimes, Bollinger, New York.
Banuri, Tariq (1989) "Black Markets, Openness, and Central Bank Autonomy "Working Paper No. 62, Helsinki, World Institute of
developments Economics Research, August.
Biswas, B and S Nandi (1986): "The Black Market Exchange Rate in a Developing Economy: The case of India:, Indian Economic Journal
vol. 33. fylarch, pp23-24.
Blejer, M.I. (1978) "Exchange Restrictions and the Monetary Approach to the Exchange Rate" Frenkel J.A. and Johnson, H.Q Ihe Economics of Exchange Rates: Selected studies Addison Wesley, Readings.
Blejer, M.I. (1978) "Black Market Exchange Rate Expectation and the Domestic Demand for Money, Some Empirical Results" Journal of
Monetary Economics, vol.4.
Boulding, K. (1947) "A Note on the Theory of the Black Market" American Economic Review, vol 37, March, pp 107 - 20.
Canto, V.A. (1985) "Monetary Policy, Dollarisation, and Parallel Market Exchange Rates: The Case of Dominican republic" Journal of
International Money and Finance, vol 4, December, pp 507 - 521.
Calvo, G and C. Rodriguez (1977), "A Model of Exchange Rate Determination Under Currency Substitution and Rational
Expectations", Journal of Political Economy vol 85, pp 611 - 625.
Culbertson, W. (1975) "Purchasing Power Parity, and Black Market Exchange Rate", Economic Inquiry, vol. 13, pp. 287 - 96 Chibber, A. and N. Shafik (1992); "Development and Inflation with Parallel market: an application to Ghana", Journal of African Finance and
Economic Development, vol. 1, No. 1, pp 107 - 133 De Macedo, J.B. (1985): "The Foreign Exchange Market in Sudan:
description and Analysis" Princeston University and NBER Mimeo.
De Macedo, J.B. (1985): "Exchange Rate Behaviour with Currency inconvertibility" Journal of International Economics, Vol 12, pp. 65 -
Dornbusch, Rudiger; D.V. Dantas; C. Pechman; R. Rocha; and Simon (1983); "The Black Market for Dollars in Brazil" Quarterly Journal
of Economics, vol 98, No 1.
Edwards, S. (1989); "Real Exchange Rates, Devaluation and Adjustments; Exchange Rate Policies in Developing Countiies",M.I.T. Press
(Carnblidge, Mass.)
Edwards, S. and P. Montiel (1989), "Macroeconomic Policies, The Real Exchange Rate, and Devaluation Clises in Developing Countlies"
NBER working paper.
Elbadawi, I.A. (1990) "Inflationary Process, Stabilization and the Role of Public Expenditure in Uganda" The world Bank Macro economic
Adjustment and Growth Division. Washington D.C.
Elbadawi, I.A.(1991) "The Black Market for Foreign Exchange and Macroeconomic Management in Sudan" unpublished, The Wodo,, ",:::-
Bank, Washington D.C.
Elbadawi, I.A. ~1992) "Macr~economic Management an? the B~a.c~ Mar-for F?re1gn excha~ge m Sudan" World Bank Pohcy Resrar~h /
workmg paper senes, WPS859, February.
Engle, F. and Granger (1987): "Cointegration and Error-correction, Representation Estimation and Testing" Econometrical 55, pp 251 -
Flood, R. and P. Garber (1984) "Collapsing Exchange Rate Regimes: Some linear examples" Journal of International Economics, Vol. 17, pp 1 -16.
Flood, R.P. (1978) "Exchange Rate Expectations in Dual Exchange Market", Journal of International Economics Vol 8. pp 65 - 77.
Fishers, S. (1990): "Devaluation and Inflation" in Dornbush, R; Leslie, F.
and Helmers, policy Makers in Developing Countries (New York :The World Bank/Oxford University Press, 1990).
Ghei, N and Kiguel M. (1992) "Dual and Multiple Exchange Rate System in Developing Countries: Some Empilical Evidence" World Bank
WQiking_p.ap..e, 8 81.
Gupta, S. (1984) "Unrecorded Trade at Black Exchange Rate: Analysis, Implications, and Estimates, Auss..enwirts.cilarft, vol. 39, May, pp. 75- 90.
Intriligator, M.D: Econometric Models techniques and Application, North Holland, Oxford, 1987.
Jebuni, C.D, N.K. Sowa and K.A Tutu (1991): "Exchange rate policy and Macroeconomic performance in Ghana" AERC Research paper, No
Johnson, G.G (1985): "Formulation of Exchange Rate Policies in adjustment Programmes" Occasional paper, 36 washington, IMF.
Kamin, S.B (1991) "Argentina's Experience with Parallel Exchange Market:1981 -1990 "Unpublished Board of Governors of the Federal
Reserve, washington, D.C.
Kamin, S.B. (1993) "Devaluation, Exchange Controls and Black Markets for Foreign Exchange in developing countries" Journal of Development Economics, vol 40, nOl, pp 151 - 169.
Kanfman, D and S.A O'Connel (1990); the macroeconomics of unofficial Foreign Exchange Market in Tanzania" Unpublished, the World
Bank, Washington D.C.
Kesekende, I.A. and G. Ssemogerere (1992): "Exchange Rate Unification and Economic Development: Case study of Uganda 1981 - 1992
"Final Report of Research Submitted to the African Economics Research Consortium, Nairobi, December.
Kharas, H. and B. Pinto (1989); "Exchange Rate Rules, Black Market premia and fiscal deficits: The bolivian hyperinflation" Review of
Economic Studies; 56, pp 435 - 48.
Kiguel, M. and J. Lizondo (1990); "Adoption and abandonment of Dual Exchange Rate Systems" Revista de Analysis Economic vol 5, pp 2 -23.
Kiguel, M (1992): "Exchange Rate Policy, the real Exchange Rate and Inflation: Lesson from latin America World Bank Po]icy Research
working paper series, WPS880, April.
Kiguel, M.A. and S.O O'Connell (1994): "Parallel Exchange Rates in Developing Countries; Lessons from Eight case studies" The World
Bank Policy Research working paper, 1265 March.
Koutsoyianis, A : "Theory of Econometric, English Language Book Society Macmillian 1988.
Krueger, A. : Liberation Attempts and consequences Bollinger, New York, 1987.
Krueger, A.0 (1985) : Exchange Rate Determination, Cambridge University Press.
Downloads
Published
June 22, 2023
Series
Copyright (c) 2023 CODESRIA Books Publication System
