The Black Market for Dollars in Venezuela

17 Pages Posted: 22 Dec 2008

See all articles by Samuel W. Malone

Samuel W. Malone

University of the Andes

Enrique ter Horst

Universidad de los Andes, Colombia - School of Business Administration

Date Written: December 18, 2008

Abstract

In February 2003, the Venezuelan government imposed a strict capital control policy to stem the outflow of dollars. We describe the mechanics and structure of the resulting black market for foreign exchange, present a theoretical model in the stock-flow tradition of Dornbusch et al. (1983), and evaluate the performance of our model against past models from the literature. Our model of the Venezuelan black market premium is parsimonious but achieves the lowest RMSE. We find a significant role for the lagged premium, the rate of depreciation of the black market rate, and changes in foreign reserves.

Keywords: Black market, exchange rates, Venezuela, capital controls

JEL Classification: G0, O1

Suggested Citation

Malone, Samuel W. and ter Horst, Enrique, The Black Market for Dollars in Venezuela (December 18, 2008). Available at SSRN: https://ssrn.com/abstract=1318227 or http://dx.doi.org/10.2139/ssrn.1318227

Samuel W. Malone (Contact Author)

University of the Andes ( email )

Carrera Primera # 18A-12
DC D.C. 110311
Colombia

Enrique ter Horst

Universidad de los Andes, Colombia - School of Business Administration ( email )

Bogota
Colombia

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