Black market rates like Dólar Blue are not common for a country like Argentina. The Convertibility Plan.” The Convertibility Plan was a monetary policy that pegged a fixed amount of the then Argentine currency, the austral, to the United States dollar. To avoid the government's heavy tax policies, nearly half of the economy moved to land (Porzecanski, 2012).
We will soon discuss some of Fernández's policies that lead to the creation and further spread of the black market for dollars, colloquially known as Dólar Blue. Arbolitos is the term given to people who act as the front line of black market exchanges. In Section I, I provide graphs of the Dólar Blue rate and the official rate, and discuss changes in rates relative to the dates of the cepo cambiario policies.
Thus, the black market exchange is likely to be a much better indicator of the true value of the currency and the corresponding rate of inflation. In my analysis, I aim to prove the cause of cepo's specific policies. fueled the rise of the black market premium.
The Dólar Blue Premium
Since almost day one of January 2013, the black market rate has continued to rise, indicating a devaluation of the peso against the dollar. By comparing the dates of the cepo cambiario policies with the significant fluctuations in Figures 1 through 4, I found five restrictive policies whose dates coincide with changes in black market premiums. These policies will play an important role in the methodology and estimation sections of this chapter and will be referred to as policies 1 through 5.
Policy 2, a travel capital control, involves AFIP's regulation of the amount of dollars Argentine nationals would receive for travel purposes based on responses given in an online form and personal income as of May 22, 2012. The last policy that I found noteworthy would be referred to as Policy 5, which came into effect on 25 April 2013, as the government speculated on further devaluation of the official rate, thereby maintaining the 1.2% increase. Policy 1, the individual capital controls, takes place on May 10, 2012, and falls just as the first major devaluation occurs on the black market.
Policy 3, the pension capital control, of July 13, 2012 comes just days before the biggest devaluation of the year on July 18, when the Dólar Blue reaches $6.73 pesos/dollar with a premium of 47.9%. Each of these policies is relevant because four of the five, policies 1 through 4, represent forms of government-imposed capital controls, and policy 5 is a direct government intervention to keep the official exchange rate artificially low. Capital controls and manipulation of the official exchange rate limit the supply of money legally accessible to citizens.
Again, the black market continues to meet the demand for dollars due to tighter legal restrictions. In the next section, I provide further justification for my hypothesis that the cepo cambiario policies cause the change in the premium by discussing the theory of purchasing power parity to calculate the implied inflation rates using black market exchange rates.
Black Market Exchange Rates, Purchasing Power Parity and Inflation
In general, black market exchange rates better reflect people's expectations of the purchasing power of their currency. Using purchasing power parity theory, we can use the black market exchange rate to calculate the implied inflation rate in Argentina. Previous literature on black market exchange rates tests and explains both their effectiveness and their adjustment sensitivity to changes in relative prices in line with PPP theory.
Bahmani-Oskooee and Tankui (2008) argue that in testing the PPP theory, black market exchange rates are a more accurate measure of the adjustment process to changes in relative prices than official exchange rates. Using quarterly data from twelve developing countries to test the PPP, they found that not only is the PPP validated, but in the long run the speed of adjustment between relative prices and the exchange rate is greater when the black market exchange rate is used. to test the PPP. While we know that PPP may not be exact in the short run, these two properties of efficiency and speed of adjustment suggest that the black market exchange rate is a much more reliable indicator than the official exchange rate in predicting market trends.
Because black market rates are more reliable expectations of purchasing power, I use the Dólar Blue exchange rate in my calculations to find the implied monthly Argentine price level, which can then be used to calculate the rate implied monthly inflation. The line seems very volatile because it measures the various ups and downs that the black market experienced. Logically, the fall in the inflation rate falls in the month immediately after the sharp devaluations fall again due to the fact that any rise in the black market exchange rate is immediately followed by a fall (Dornbusch et al., 1983).
Through the theory of purchasing power parity, I tested the exchange rate on the black market in Argentina to calculate the exchange rate. In other words, this analysis of the black market exchange rate could test whether the Fernández administration is covering up the current state of its economy.
Methodology
This brings me back to my central hypothesis, are cepo cambiario policies driving premiums in Dólar Blue markets as they seem. In the case of Argentina, we will also assume that the dollar black market is a separate phenomenon with no effect on interest rates or the official exchange rate. The wallet or stock of black market dollars is essential to support the implication that changes in either the financial market or the flow market can cause a certain increase in the premium and then a resulting adjustment path for both.
The model further supports that expectations of future devaluations of the currency can cause sudden spikes in the premium, only to rise or fall in value again after the official devaluation takes place. One hypothesis states that the premium is a random phenomenon unrelated to official government action (i.e., government policy is exogenous). In this case, all variation in the exchange rate premium would be explained by measurable seasonal fluctuations in the demand for dollars and random shocks in the demand for dollars or pesos.
The second hypothesis states that the premium is caused by government intervention and capital controls. This model implies that the premium (measured as the percentage difference between the black market and official rate) is a function of Policies 1-5 outlined above, xt, seasonal fluctuations in the demand for dollars relative to pesos, seasonal and random shocks in the exchange market, etc. Each policy in the matrix xt is measured by a dummy variable that takes a value of 1 from the day the policy is implemented and for each day thereafter.
In this hypothesis, the premium in equation (1) is determined only by a constant premium, random shocks, and possibly seasonal variations in the market. If the policy turns out to be important, (δ'xt) will contribute significantly to the premium.
Estimation Results Table 2
The coefficients of the control policies show the marginal effect they have on the premium. It is interesting to note that even though we controlled for the fact that the other four policies were already in force, this coefficient of 7.1 means that policy 5 alone still increases the premium by 7.1 percentage points. Together, the point estimates show that these policies increased the black market premium by 56.3 percentage points.
Since the implementation of the Menem Convertibility Plan, which pegged the peso to the dollar on a one-to-one basis, the difficult Argentine financial crisis of 2001 and the election of the Kirchners as president, we have seen the American model period developed. The thesis highlights the efficiency of black market exchange rates in better determining a currency's true purchasing power parity and predicting implicit, more reliable inflation rates. The rise of the Dolar Blue exchange rate remarkably coincides with the implementation of certain economic policies by the Argentine government.
The central hypothesis stated that the restrictive policies under President Cristina Fernández de Kirchner's government program known as cepo cambiario drive up the premium of the Dólar Blue exchange rate. My goal was to test whether or not five specific policies in the Fernández cepo cambiario affect the black market premium and, if so, to determine how much of an effect each has. Through a regression analysis, we found that five policies in cepo cambiario as well as a few seasonal factors contribute significantly to the premium.
Due to the characteristic risk associated with the existence of an illegal exchange rate market, the test shows that the black market exchange rate would itself be 4.6 percentage points higher than the officially reported exchange rate. Taking policies 1-5 and seasonal factors into account, we see that 92% of the total variation in the Dólar Blue premium is caused by these factors.
Entire Dólar Blue Timeline
2011 Daily Pesos/Dollar Exchange Rates
2012 Daily Pesos/Dollar Exchange Rates
2013 Daily Pesos to Dollar Exchange Rates
Cepo: Son 30 acciones que han afectado el sistema cambiario argentino”. YoProfesional. ¿Cuál es el plan del gobierno para prohibir la difusión de la cotización azul? Están duplicando los suministros: aumentando el recargo por viajes al extranjero al 20% y generalizándolo”. Lanacion.com.ar.
«AFIP baja límite de compra de dólares, firmas canjean Corralita». Lanacion.com.ar.
