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Original Articles

Efficiency of the black market for foreign exchange and PPP: the case of the Dominican Republic

Pages 173-176 | Published online: 07 Oct 2010
 

Abstract

Efficiency of the black market for foreign exchange in a developing country can be assessed by testing whether that market complies with the ‘relative’ version of the purchasing power parity hypothesis. This paper applies nonstationarity and cointegration to investigate this hypothesis for the Dominican Republic. Both the Engle-Granger and Johansen techniques support cointegration, so the black market for foreign exchange in the Dominican Republic is efficient.

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