This paper tests the efficiency of dollar exchange rate black-markets for t
he currencies of six formerly socialist countries of Eastern Europe, under
conditions of imperfect information, high transaction costs and pronounced
turbulence due to political and economic crisis and reform. We find evidenc
e of volatility spillovers in conditional mean affecting only the markets f
or the Bulgarian lev and Rumanian lei, and limited evidence of volatility s
pillovers in conditional variance which imply the possibility Of some polic
y coordination emanating from the Soviet Union. Nevertheless, on balance ou
r results lend broad support to the efficiency of exchange rate black-marke
ts, and to previous results concerning floating exchange rate systems in ge
neral. (C) 2001 Elsevier Science Ltd. All rights reserved.