The informational efficiency of the black and official exchange markets of DR-CAFTA nations
by Shuming Bai, Kai S. Koong, Lai C. Liu, Binshan Lin
International Journal of Electronic Finance (IJEF), Vol. 2, No. 3, 2008

Abstract: This study examines the long-run informational efficiency and short-run predictability of the black and official exchange markets of Dominican Republic-Central American Free Trade Agreement (DR-CAFTA) nations. Applying a battery of nonparametric as well as time series models, this study finds that the black market information exhibited a nonrandom behaviour. In four of the six examined countries, the black and official markets were found to have a co-integrating relationship. Both the vector error correction model and the Granger causality test confirmed that the black market information was a good predictor of the official rates.

Online publication date: Wed, 01-Oct-2008

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