Abstract
Mohsen Bahmani-Oskooee* and Gour G. GoswamifRecently the impact of institutional factors on macro variables has been gaining momentum.Researchers have investigated the impact of corruption, law and order, and bureaucracy on economicgrowth, inflation, investment, productivity, and the real exchange rate. In this article, we investigateempirically the impact of institutional factors on the black market premium. In many developingnations, because of government restrictions on capital and trade flows, there exists a black market forforeign exchange. By using data from 60 developing countries over the 1982-1995 period, we showthat the black market premium is higher in countries that are plagued by more corruption. This tindingseems to be insensitive to five different measures of corruption as well as whether cross-section orpanel data are used.JEL Classiflcation: F31, ZIO
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