Monetary model of black market exchange rate determination: evidence from African countries

Abstract

Analyses parallel exchange rate behaviour in African countries, using a monetary approach. Employs quarterly data over the 1980‐1991 period, pooled across 18 countries and the predictions of the monetary approach are not contradicted by the data. Finds, in particular, that monetary expansion, depreciation of official exchange rate, expectation of inflation, and rising interest rate cause depreciation of domestic currency in the black market while rising real income causes its appreciation.