Abstract
A model of the determination of parallel market exchange rate premium in liberalized economies is presented. Clear distinction is made between fundamental and nominal determinants with economic justification(s) given for every variable. Likely data problems that may arise during implementation are discussed and suggestions on circumventing are made.
Highlights
Considerable research attention was devoted to the issue of parallel market exchange rate premium (PMP) in the 1980s through to the late 1990s in the wake of the widespread adoption of liberalisation policies in developing countries
This paper aims at providing a framework for analyzing the determination of the premium under a liberalized economic setting
PMP has commonly been analyzed under two frameworks: the real trade models (RTMs) and the portfolio-balance (PB)
Summary
Considerable research attention was devoted to the issue of parallel market exchange rate premium (PMP) in the 1980s through to the late 1990s in the wake of the widespread adoption of liberalisation policies in developing countries. (2015) Determination of Parallel Market Exchange Rate Premium. And Levine [9] associated about half a percentage point in the annual growth of GDP with a 10% exchange rate premium. A study of the determination of the premium could be rewarding in terms of yielding insights into some important dimensions of the growth process. This paper aims at providing a framework for analyzing the determination of the premium under a liberalized economic setting. Following this introduction is the section which provides a review of related theories and is succeeded by one on model specification. The section after dealt briefly with the issues of anticipated data problems while the final section provided a concluding remark
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