Impacts of foreign exchange auctions on the informal market rate in Myanmar

Koji Kubo

No 532, IDE Discussion Papers from Institute of Developing Economies, Japan External Trade Organization(JETRO)

Abstract: Since the abolition of the official peg and the introduction of a managed float in April 2012, the Central Bank of Myanmar has operated the daily two–way auctions of foreign exchange aimed at smoothing exchange rate fluctuations. Despite the reforms to the foreign exchange regime, however, informal trading of foreign exchange remains pervasive. Using the daily informal exchange rate and Central Bank auction data, this study examines the impacts of auctions on the informal market rate. First, a VAR analysis indicates that the official rate did not Granger cause the informal rate. Second, GARCH models indicate that the auctions did not reduce the conditional variance of the informal rate returns. Overall, the auctions have only a quite modest impact on the informal exchange rate.

Keywords: Myanmar; Foreign exchange; Monetary policy; Foreign exchange auctions; Informal market rate; GARCH model (search for similar items in EconPapers)
JEL-codes: E65 F31 O24 (search for similar items in EconPapers)
Date: 2015-08-01
New Economics Papers: this item is included in nep-ger, nep-mac and nep-mon
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Published in IDE Discussion Paper = IDE Discussion Paper, No. 532. 2015-08-01

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https://ir.ide.go.jp/record/37647/files/IDP000532_001.pdf First version, 2015 (application/pdf)

Related works:
Journal Article: Impacts of Foreign Exchange Auctions on the Informal Market Rate in Myanmar (2017)
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