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A Monetary Model of the Parallel Market for Foreign Exchange

Journal of Economic Studies

ISSN: 0144-3585

Article publication date: 1 April 1991

Abstract

Develops and tests a monetary model of the parallel market for foreign exchange which incorporates forward‐looking expectations and currency substitution features. Econometric results using quarterly data for a group of 12 developing countries show that changes in official exchange rates and monetary disequilibria are the major determinants of the behaviour of parallel exchange rates. Changes in expected rates of return on domestic and foreign currency play a significant role only in middle‐income economies.

Keywords

Citation

Agénor, P. (1991), "A Monetary Model of the Parallel Market for Foreign Exchange", Journal of Economic Studies, Vol. 18 No. 4. https://doi.org/10.1108/EUM0000000000153

Publisher

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MCB UP Ltd

Copyright © 1991, MCB UP Limited