TY  - JOUR
AU  - Flood,Robert
AU  - Marion,Nancy
TI  - Risk Neutrality and the Two-Tier Foreign Exchange Market:  Evidence from Belgium
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 3015
PY  - 1989
Y2  - June 1989
UR  - http://www.nber.org/papers/w3015
L1  - http://www.nber.org/papers/w3015.pdf
N1  - Author contact info:
Robert Flood
Notre Dame
E-Mail: rflood1@nd.edu

Nancy Marion
Department of Economics
Dartmouth College
Hanover, NH  03755
E-Mail: Nancy.P.Marion@Dartmouth.EDU
AB  - Most of the literature on two-tier exchange markets is built around models in which domestic policy can exert a powerful influence on the spread between the current account exchange rate and the capital account exchange rate. We show that if optimizing agents are risk neutral, domestic policy has no significant influence on the spread. Our work with Belgian data suggests that a nsk neutral specification for Belgian residents acting in the two-tier market is hard to reject, and we also find evidence that domestic variables do not affect the Belgian spread.
ER  -