Hussein Atwan Obsessed *: contraction of the dinar exchange between the official and parallel market price gap in the past and present: greater stability less sales **
by Hussein Atwan
- published in 22/03/2018[You must be registered and logged in to see this image.]
It is no secret that the specialists sell foreign currency in the Iraqi central tool window of the most important instruments of monetary policy in Iraq (Open Market Operations Open Market Operation) began its work the end of the [...]
No secret to the specialists that the foreign currency sale in the Iraqi central tool window of the most important instruments of monetary policy in Iraq (Open Open Market Operations Market Operation) began its work the end of 2004 to sterilize excess liquidity dinar Sterilization and nutrition needs of the balance of financing payments in order to maintain the stability of the currency exchange rate local followed by the stability of the general price level, as follow the Iraqi central period 2004-2008 creeping peg crawling peg de facto de facto, while the follow fixed peg system hard peg de facto for the period (2009 until now), the US dollar promise installed nominally nominal Anchor CIA Cash Aceh.
This period permeated the exchange rate gaps between the different dinar exchange in the official market and the parallel rate, and these gaps widen and shrink depending on several factors including:
Foreign currency to the size of the total demand of foreign currency sales coverage ratio (cover the supply of required).
The nature of the sales in the window (cash, money orders, letters of credit) Increasing cash sales shrinking relatively drainage gap, due to the intensity of business dealings with a neighbor Mhoudorh of the banking system.
Help sell foreign currency window and overlapping regulatory actions among closely related to the window of the sale of foreign currency working government institutions (border crossing points, the Tax Department) and the use of official documents issued by these basic requirements of the departments by the Iraqi Central in the past years to meet the purchase of the dollar from the sale of currency window requests foreign, promise proof of the commitment of banks to pay them what the tax obligations and tariffs Kmarkip.
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Husaain Atwan-Exchange rate gap-finalÂ
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Hussein Atwan Mahous: * The exchange rate gap between the dinar narrowed
Past and Present: More Exclusivity with Less Sales **
Lynn is afraid of specialists that the window selling foreign currency in the ethnic center is one of the most important tools
Monetary Policy in Iraq (Open Market Operations) 3 & 0 (M) The work began its end
In 2004 to sterilize excess liquidity 9611117360 and feed the balance of payments needs in order to
Maintaining the stability of the local currency exchange rate followed by stability of the general level
For the delay, follow the Central Station for the period 2004-2008
De facto employment of 38,646 (26), while the fixed linkage system was applied in practice for 1811 (2009)
To date, the US dollar has been established as a monetary policy.
This period has been characterized by divergent exchange gaps between the dinar exchange rate
The official markets and balances and these gaps are dirty and take precedence for several factors, including:
1. Foreign currency sales coverage ratio for total foreign currency demand (supply coverage).
2. The nature of sales in the window (cash receipts). The increase in cash sales reduces the exchange gap
Due to the intensity of commercial transactions with a neighboring country, which is composed of the banking system.
3. Instructions for the sale of foreign currency and the interference of control transactions between government institutions with close work
Link to foreign currency sale window (border ports, tax department)
The use of official documents issued by these constituencies is essential
Before the ethnic center in the past years to meet the demands of dollar borrowing from the window to sell and feed the foreign currency
Evidence of the obligation of banks to pay their obligations of tax and customs as customs.
Witnessed the gap between the exchange rate in both markets
Official and parallel since the beginning of February 2018 as a partial exchange rate in the parallel market
On average during the month of February was about 1220 JD / $ while the total was
Window sales in the same month were $ 3.8 billion, a point that is in favor of monetary policy
Past years (which have seen financial abundance) have reached the exchange rate at the level of 1220 dinars / $
In the parallel market, larger sales in the foreign exchange window are valued at $ 4.3 billion
This was witnessed in the first five months of 2014, ie the Iraqi Central Bank was able to start early this year
88 percent of the achievement of a greater stability in the dinar exchange rate and less than the foreign currency sales
In previous years.
This great success of the Central Bank of Iraq required considerable judgment that began to classify banks as entry plots
The foreign currency sale window, based on seven criteria, reflects the Bank's compliance with the relevant rules
In the buying and selling of foreign currency, as well as the transparency of the classification and its periodic revision
Ranking heavily in making the buying and selling of the dollar on a sound basis. Thus nullifying its application
As a result of the manipulation and competition processes in the parallel market, as well as the cancellation of the role of the intermediaries
They used a large chunk of the exchange gap margin: so did the work
Which was carried out by the Audit and Returning Department of the Central Bank's Financial Operations Department
To control the sources of funds entering the window and to ensure that they reach the final beneficiary.
All this is due to the principle of specialization in the work done by the bank
Central Bank of Iraq by abandoning the obligation of banks to enter the window
The tax payment document and the customs tariff from the specialization and bases of the work of the two departments (tax and ports)
(Border). The ethnic centralization of commercial banks entering the window is necessary to present these documents in a dominant position
In which financial and administrative corruption in many parts of the Iraqi state, may turn banks to
Illegal means to obtain such documents to transfer the financial burden of these illegal means to
The exchange rate in its parallel market is the exchange rate of the exchange gap between the two prices.
All these actions by the ethnic center have narrowed a fraction of the gap
Exchange rate "to test the demand for foreign currency at the end of February and early March
The year ended in November with demand reaching US $ 3.9 billion at the end of February 2018 compared with demand
In January of the same year (approximately $ 4.2 billion), a rate close to (10%)
The amount of this decline in demand for foreign currency can be interpreted economically as being close to the demand for
Foreign exchange rates and take advantage of the wind margin between official and parallel exchange rates
The demand for the exchange is directly proportional to the exchange gap (), as this demand is not feasible in view of the large decline of the gap
The current exchange rate has led small-scale traders to maintain the demand momentum in the parallel exchange market
And to keep the foreign currency request for the purpose of financing Iraq's balance of payments operations.
(*) Economist at the Central Bank of Iraq
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1 See: Ismail, Ali Mohsen, Governor of the Central Bank of Iraq (2017)
Sale of foreign currency