Ilir Miteza

Do nominal devaluations lead to real devaluations in LDCs

Abstract Devaluation or depreciation of nominal exchange rate is a policy to boost exports. However, since any favorable effects of devaluation could be offset by its inflationary effects, one must consider real devaluation. This note investigates whether nominal devaluation leads to real devaluation by employing a relatively new method of cointegration and error-correction modeling.

The long-run relation between black market and official exchange rates: evidence from panel cointegration

Abstract Due to the lack of long time series data on black market exchange rates, previous research investigated the relation between black market and official exchange rates only for a couple of countries. In this paper, we employ time-series annual data over the 1973–1990 period from 49 countries as well as panel cointegration techniques to show that the black market and official exchange rates do have a long-run relationship. The implication is that any foreign exchange or direct controls will have only short-run effects on the official rate. In the long-run, the official rate will adjust toward the black market rate.

Panel cointegration and productivity bias hypothesis

Productivity bias hypothesis claims that deviation of the PPP based exchange rate from the equilibrium rate is mainly due to productivity differentials among countries. Early studies that employed cross‐sectional data in testing the hypothesis provided mixed results. A few time‐series studies have provided some support for the hypothesis. This paper relies on panel data and recent advances in panel unit‐root and panel cointegration analysis and provides strong results supporting the hypothesis. The results are not sensitive to classification of the world by regions.