In an attempt to test hypotheses about black market, exchange rates, market size, economic integration, and several other variables, gravity models were estimated to explain trade flows among less developed countries (LDCs), among developed countries ...
In an attempt to test hypotheses about black market, exchange rates, market size, economic integration, and several other variables, gravity models were estimated to explain trade flows among less developed countries (LDCs), among developed countries (DCs), from LDCs to DCs, and from DCs to LDCs. It was shown that distortions attributable to black market exchange rates have a significantly negative effect on the value of trade and that differences in per capita income have an adverse effect on LDCs exports to DCs. Per capita income and population contribute unevenly in creating market size effects (i.e., productive and purchasing capacity) and the now-defunct East African Community had a significant effect on "LDCs to LDCs" trade. [F15]