Abstract
This study evaluates the impact of ‘war news’ on black market exchage rate deviations from purchasing power parity (PPP). In wartime Vietnam, the greater the number and intensity of U.S. troop engagements with the enemy, the greater the confidence in the South Vietnamise government and its fist currency. During the period of heaviest U.S. military operations, from 1967 to mid-1969, about 20–25 percent of the value of the piaster on the black market can be attributed to this confidence factor. The results suggest that where variables to measure the news are available, short-run deviations from PPP can be readily explained.
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