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The Parallel Market Premium and Exchange Rate Unification: a Macroeconomic Analysis for Zambia

In: Parallel Exchange Rates in Developing Countries

Author

Listed:
  • Janine Aron
  • Ibrahim A. Elbadawi

Abstract

The economy of Zambia, 1964–90, provides an example of a large and thriving black market for foreign exchange. The Zambian black market has survived a long sequence of policy reforms aimed at achieving a more flexible exchange rate and price system and liberalizing trade and financial flows. Despite aggressive policies in these areas, especially with regard to the exchange rate, the black market premium (defined as the ratio of the black rate to the official rate minus one) remains high. For the 1970–88 period, the premium averaged 100 percent; it exceeded 400 percent by 1990.

Suggested Citation

  • Janine Aron & Ibrahim A. Elbadawi, 1997. "The Parallel Market Premium and Exchange Rate Unification: a Macroeconomic Analysis for Zambia," Palgrave Macmillan Books, in: Miguel A. Kiguel & J. Saul Lizondo & Stephen A. O’Connell (ed.), Parallel Exchange Rates in Developing Countries, chapter 8, pages 291-332, Palgrave Macmillan.
    • Handle: RePEc:pal:palchp:978-1-349-25520-7_9
    DOI: 10.1007/978-1-349-25520-7_9
    as

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