Browsing by Author "Janvier, Nkurunziza"

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    Determination of Efficiency, Exchange Rate and the Premium of the Parallel Market for Foreign Currency in Burundi
    (A.A.U, 1997-06) Janvier, Nkurunziza; Admassie, Assefa (Dr)
    Although Burundi is a moderate premium country, the parallel market for foreign currency has been operating for a number of decades. This was in response to the move by Burundi's authorities to impose trade and exchange controls as a way of managing economic imbalances in the early 1960s. This paper investigates the functioning of the market and its implications on the economy, based on an econometric approach. Both the random walk model and the Lung-Box test reveal that the parallel market for foreign currency in Burundi is efficient. Furthermore, a simultaneous equation model is used to isolate the main determinants of the parallel rate. Moreover, a stock/flow model is applied to investigate the main factors behind the determination of the premium. It is found that flow variables are by far the most important factors. The model also leads to the finding that the premium has a long-run and short-run behavior. On the basis of these findings, policy actions are recommended.