Black Market for Foreign Currencies: A Lesson from a Siege Economy

Abstract

This paper investigates efficiency performance of the black market for foreign exchange in Sudan. The finding of the paper indicate the inefficiency hypothesis cannot be rejected. This result imply, authorities in the central bank need to be cautious about use of the black market depreciation rate as indicator to official exchange rate devaluation rate. The finding of the paper also shows there is no significant evidence of structural change in the behavior of the black market due to the loss of the country a significant portion of its oil revenue after the country split. This result can be interpreted as evidence of weak association of the black market with fundamentals of the economy.