Economics, Econometrics and Finance
4 years ago

Foreign exchange market power leads to stable currency rates in Guyana

SSRN Electronic Journal
Analysis of an Unannounced Foreign Exchange Regime Change
Tarron Khemraj, Sukrishnalall Pasha

Paper Summary

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The foreign exchange rate in Guyana has been stable since 2004 due to increased market concentration, long-term capital inflows, and banks' desire for stability. The dominance of commercial banks in trading has led to lower volatility in the exchange rate. The study also shows that trader market power plays a role in stabilizing the G$/US exchange rate. Additionally, a model was presented to analyze the effects of monetary policy in the presence of a threshold interest rate.