Regulating the Foreign Exchange Market in Ethiopia: The Challenges and Next Reform Areas
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Date
2023-05-01
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Addis Ababa University
Abstract
Many important aspects of foreign exchange market organization are affected by regulations.
Thus regulations are an integral part of the organization or infrastructure of foreign exchange
markets. They typically place limits on the use and allocation of foreign and domestic currencies,
operations by intermediaries, the types and characteristics of contracts, and trading locations.
They can significantly alter exchange rate dynamics by circumscribing how individuals and
institutions interact in the market.
Regulation of the foreign exchange market plays a significant role in macroeconomic
development. It secures the stability of financial operations so long as properly formulated and
adaptable to the changing circumstances of today’s economic integration. Foreign exchange
market regulation becomes an economic policy concern for both developing and developed
countries. Of its contribution to economic development in the general and financial market in
particular government pays considerable attention to the area.
This work studies the regulation of the foreign exchange market in Ethiopia. In doing so, it
assesses the existing regulatory framework governing the foreign exchange market. It examines
whether existing regulatory laws cause challenges to the market and points out the necessary
next reform areas if needed. The study was conducted based on legislative analysis. The finding
of the study shows that there are different challenges out there that hinder the regulation of the
foreign exchange market. It also shows that further regulation of required for the inadequacy of
the existing regulation in covering some areas. Finally, this work provides some
recommendations which the writer considers appropriate
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Keywords
Foreign exchange market, Regulation