Why Do Currency Black Markets Exist?
- Weak economic fundamentals, such as a high rate of inflation and limited foreign exchange reserves.
- Strict currency controls that limit the amount of foreign currency available to residents.
- A fixed exchange rate regime where the domestic currency is pegged at an unrealistically high exchange rate to the U.S. dollar or another global currency.
- A lack of confidence among the citizenry in the value of the domestic currency.
Where Is It Becoming Prevalent?
The Bottom Line