An experiment with official and parallel foreign exchange markets in a developing country

Authors
Hazlett, D Ganje, J
Citation
D. Hazlett et J. Ganje, An experiment with official and parallel foreign exchange markets in a developing country, J ECON EDUC, 30(4), 1999, pp. 392
Citations number
1
Categorie Soggetti
Economics
Journal title
JOURNAL OF ECONOMIC EDUCATION
ISSN journal
00220485 → ACNP
Volume
30
Issue
4
Year of publication
1999
Database
ISI
SICI code
0022-0485(199923)30:4<392:AEWOAP>2.0.ZU;2-X
Abstract
Students take the roles of importers and exporters in a developing country. The experiment shows how international trade falls if the government tries to maintain an overvalued currency without expending international reserve s. It also shows that the exchange rate in a parallel market without penalt ies (a gray market) approximates the free-market value of the currency, whe reas the black-market rate need not do so.