Title : Smuggling as Another Cause of Failure of the PPP

Authors : Gour Gobinda Goswami, Mohsen Bahmani-Oskooee

Abstract : In theoretical literature, smuggling is considered as a factor contributing to the deviation of the PPP-based exchange rates from the equilibrium exchange rates with little empirical support. In this paper, we used panel data for 33 developing countries over the period 1982-1995 and used panel unit root and panel cointegration technique along with pooled OLS, fixed effects, random effects, and Parks estimator in an augmented Balassa-Samuelson framework. Using two different proxies for smuggling it is found that smuggling into a country leads to an appreciation of domestic currency that can be considered as another cause of loosing competitiveness by many developing countries.

Journal : Journal of Economic Development Volume : 28 Year : 2003 Issue : 2
Pages : 23-38 City : Edition : Editors :
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