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Middle East and Central Asia > Saudi Arabia

You are looking at 1 - 2 of 2 items for :

  • Type: Journal Issue x
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Cover IMF Working Papers
Liquidity Management under Fixed Exchange Rate with Open Capital Account
Mariam El Hamiani Khatat
and
Mr. Romain M Veyrune
This paper introduces a theoretical framework for liquidity management under fixed exchange rate arrangement, derived from the price-specie flow mechanism of David Hume. The framework highlights that the risk of short-term money market rates un-anchoring from the uncovered interest rate parity due to money and foreign exchange market frictions could jeopardize financial stability and market development. The paper then discusses operational solutions that stabilize money market rates close to the level implied by the Uncovered Interest Rate Parity (UIP). Liquidity management under fixed exchange rate with an open capital account presents specific challenges due to: (1) the larger liquidity shocks induced by foreign reserve swings that challenge the development of money markets; and (2) more complicated liquidity forecasts. The theoretical framework is empirically tested based on the estimate of “offset” coefficients for Denmark and Hong Kong SAR.
Keywords:
WP; exchange rate; central bank; interest rate; rate; Fixed exchange rate regime; price-specie flow mechanism; uncovered interest rate parity; offset coefficients; monetary operations; autonomous factors; money and foreign exchange markets; discount window; capital account; supply curve; money market rate; excess reserves; FX intervention; central bank liquidity management; liquidity absorption operation; liquidity-providing operation; liquidity shock; money demand; country risk; Conventional peg; Exchange rate arrangements; Money markets; Liquidity management; Global
Cover IMF Working Papers
Monetary Operations and Islamic Banking in the GCC: Challenges and Options
Ms. Ritu Basu
,
Mr. Ananthakrishnan Prasad
, and
Mr. Sergio L. Rodriguez
The assessment provides evidence of market segmentation across Islamic and conventional banks in the Gulf Cooperation Council (GCC), leading to excess liquidity, and an uneven playing field for Islamic banks that might affect their growth. Liquidiy management has been a long-standing concern in the global Islamic finance industry as there is a general lack of Shari’ah compliant instruments than can serve as high-quality short-term liquid assets. The degree of segmentation and bank behavior varies across countries depending on Shari’ah permissibility and the availability of Shari’ah-compliant instruments. A partial response would be to support efforts to build Islamic liquid interbank and money markets, which are crucial for monetary policy transmission through the Islamic financial system.This can be achieved, to a large extent, by deepening Islamic government securities and developing Shari’ah-compliant money market instruments.
Keywords:
WP; bank; central bank; asset; market; liquid asset; Islamic Banking; GCC; Monetary Operations; conventional bank; participation paper; banking assets; Omani bank; asset share; banks ratio; return on assets; Money markets; Islamic finance; Liquidity management; Global