It's fairly well know that if you are in a country with a "problematic" economy, that exchanging money on the black market can get you a much better rate than at an official exchange.
But how do these money changes make a profit? They need both a source of local currency to supply their customers, and a means of turning the foreign currency into something usable by them.
But if you can only get local currency from official sources at a lower rate, how do the money changes obtain it at a rate that makes sense to them?
And what do they do with the foreign currency?
I am wondering if at some level the profitability of these exchanges are based on illegal markets such as commercial drug smuggling (or something else).
Does anyone know of any studies that show the economic underpinnings of black market money changers?