Determinants of the Foreign Exchange Auction Marginal Rate in Ethiopia
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Date
1998-06
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A.A.U
Abstract
Ethiopia has moved through a number of stages to achieve the
determination of mechanism . Among introduction of '
equilibrium exchange through market allocation
these, the devaluation of the Birr and the
the Dutch auction market system for foreign
exchange (Forex) in May 1993 are the first two measures taken. The
auction system helped to unify the marginal rate and the official
rate on the 59rn auction, in July 1995. It has also made possible
for the elimination of t he parallel market premium which was 52%
when it was started. The premium was totally eliminated in January
1998. The unification was speeded up as the parallel rate
appreciates and the marginal rate depreciates . Empirical findings
are made based on Log - linear zed Autoregressive Distributed Lag
Model (ADL) to determine the auction marginal rate. Number of
bidders, demand and supply of Forex are found to determine the
auction marginal rate . This study advances the following policy
implications based on the empirical findings and in the light of
the experience of some African countries; to instill methods to
improve transparency, legalization of Forex bureaus (dealers), the
maintenance of the sustainability or the unification or the rates
and to sustain the stability or the supply or Forex to the auction,
and further liberalization of the existing rules and regulation.
Description
Keywords
Auction Marginal Rate, Foreign Exchange