IMF Working Papers Volume 1994 Issue 048: Operational Issues Related to the Functioning of Interbank Foreign Exchange Markets in Selected African Countries (1994)

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Operational Issues Related to the Functioning of Interbank Foreign Exchange Markets in Selected African Countries

Author:

Ms. Yin-Fun Lum

Ms. Yin-Fun Lum
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and

Mr. Calvin A McDonald

Mr. Calvin A McDonald
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Series:: IMF Working Papers

Volume/Issue:: Volume 1994: Issue 048

Publication Date:: 01 Apr 1994

DOI:: https://doi.org/10.5089/9781451972290.001

ISBN:: 9781451972290

ISSN:: 1018-5941

Pages:: 38

Keywords:: WP; foreign currency; foreign exchange bureau; client transaction; market rate; auction rate; bureau market; allocation mechanism; foreign exchange resource; foreign exchange surrender requirement; foreign exchange arrangement; central bank of Nigeria; market distortion; Currency markets; Interbank markets; Exchange rates; Commercial banks; Global

Legal-disclaimer:: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Series:: IMF Working Papers

Volume/Issue:: Volume 1994: Issue 048

Language:: English

Publication Date:: 01 Apr 1994

DOI:: https://doi.org/10.5089/9781451972290.001

ISBN:: 9781451972290

ISSN:: 1018-5941

Pages:: 38

Keywords:: WP; foreign currency; foreign exchange bureau; client transaction; market rate; auction rate; bureau market; allocation mechanism; foreign exchange resource; foreign exchange surrender requirement; foreign exchange arrangement; central bank of Nigeria; market distortion; Currency markets; Interbank markets; Exchange rates; Commercial banks; Global

Legal-disclaimer:: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

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This paper discusses the main operational issues involved in the implementation of interbank foreign exchange systems in selected African countries. The countries considered are The Gambia, Ghana, Kenya, Mozambique, Nigeria, and Sierra Leone. The paper finds that exchange rates in these markets tend to be determined through transactions between dealers and clients at the retail level, for the most part, rather than through wholesale interdealer transactions. Additionally, many factors continue to limit the full development of these markets. In particular, informational problems limiting “real time” quotes, inadequate competition in the market, and insufficient regulations to reduce exchange rate risk and encourage “true” interdealer transactions. Despite these limitations, the markets studied have improved the efficiency of foreign exchange allocation and substantially narrowed exchange rate differentials between the official and parallel markets.

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IMF Working Papers

ISSN:: 1018-5941

Publisher:: International Monetary Fund

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