Galbis, Vicente, “Experience with Floating Interbank Exchange Rate Systems in Five Developing Countries,” International Monetary Fund WP/93/36 (Washington: April 1993).
Pertz, Klaus, and Gunther Taube, “Study on the Design of the Program of Support for Structural Adjustment in Sierra Leone,” (Hamburg: LUSO Consult Hamburg, September 1992).
Quirk, Peter J., Benedicte Vibe Christensen, Kyung-Mo Huh, and Toskihiko Sasaki, “Floating Exchange Rates in Developing Countries - Experience with Auction and Interbank Markets,” International Monetary Fund Occasional Paper No. 53 (Washington: May 1987).
The authors would like to thank Sergio Leite, Peter Heller, and Thomas Gibson for their valuable comments. The assistance of country desk officers in the collection of country-specific data and information is also gratefully acknowledged. Any remaining errors remain the authors’ responsibility.
For recent references to these systems, see Peter J. Quirk, Benedicte Vibe Christensen, Kyung-Mo Huh, and Toshihiko Sasaki, Floating Exchange Rates in Developing Countries - Experience with Auction and Interbank Markets, IMF Occasional Paper No. 53 (May 1987).
In Galbis (1993), such macroeconomic concerns as the implementation of sound monetary, fiscal, trade, and exchange policies are noted for their contribution to the successful operation of an interbank market arrangement.
The information contained in this research is accurate up to end-December 1993.
Although such transactions are, strictly speaking, different from those in a market involving the sale of foreign currency against domestic currency, they are still relevant to the domestic interbank market since they reduce the number of true interbank foreign exchange transactions taking place in the market.
This issue of the central bank’s capabilities in the market is dealt with in more detail in Section V. Here we focus mainly on dealer characteristics.
In The Gambia, surrender requirements were not formally abolished, but de facto ceased to be implemented. In Mozambique, a 50 percent surrender requirement was abolished in late 1993.
The only exception seems to be the case of Nigeria, where data on average buying/selling rates of foreign exchange involving true interbank transactions are not routinely reported to the Central Bank.
Broader macroeconomic policy issues, such as the level of interest rates and the monetary stance of the central bank are of course important. Given the scope of this paper, we focus here on the microeconomic role of the central bank in the market.
Despite this incentive, no appreciable interdealer transactions seem to be taking place in Ghana. This may be due to the fact that the use of moral suasion by the Central Bank to keep rates low, makes the “queuing” solution the more likely response of banks.
At one time, tied external aid funds were sold at a discount. The discount was abolished in 1993.