Abstract
The Dornbusch et al. (1983) model for the determination of the black market foreign exchange premium is modified and then estimated for 19 countries for various periods during 1970–1979 in which we identified the existence of a black market for foreign exchange. The outstanding result is the almost total uniformity of the estimated coefficients of the explanatory variable, expected profits from black market transactions, and the small spread of the elasticities of the black market premium with respect to the expected profits and the real official exchange rate.
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