Official and Black Market Exchange Rates in Tunisia

In this paper, we use monthly data from Tunisia for the period 1972-1998 and explore the short-run causality and long-run relationship between official and black-market exchange rates (U.S. dollar/Tunisian dinar). The econometric results indicate that the two exchange rates are cointegrated, implying a stable long-run relationship between them. Furthermore, we find that the black-market exchange rate undertakes the adjustment to the long-run equilibrium. Granger causality tests show that in the short run the black-market exchange rate causes the official rate. However, once we distinguish between the behavior of the two exchange rates in pre and post current-account convertibility we find that the black market Granger causes the official market only during the period preceding the current account convertibility. The paper concludes with comments on the implications of these findings