Extracting shadow exchange rates and foreign exchange premia during currency crises: an example from Egypt |
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Authors: | Aliaa Bassiouny Eskandar Tooma |
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Affiliation: | School of Business, The American University in Cairo, Cairo, Egypt |
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Abstract: | We utilize high-frequency data and a novel synchronous trade-matching algorithm to show that shadow exchange rates could be estimated from price spreads between depositary receipts and their underlying local stocks using an example of the recent Egyptian currency crisis. These shadow rates reflect the local black market foreign exchange rates in addition to a foreign exchange premium, which we attribute to the cost of expatriating capital during currency and capital control periods. |
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Keywords: | Arbitrage currency crisis depositary receipts (DRs) Egypt high-frequency data stock market |
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