Advertisement

Introductory Chapter: Myanmar’s Foreign Exchange Market—Controls, Reforms, and Informal Market

  • Koji KuboEmail author
Chapter

Abstract

Under extensive controls on foreign exchange and international trade, Myanmar’s foreign exchange market has achieved its development which is characterized by the prevalent informal currency deals. Clarifying how Myanmar has diverted from the premises of the existing policy analyses, we unveil the evolution and functions of its foreign exchange market. Toward this goal, we introduce the concept of an informal interfirm-based market and contrast it with the conventional bank-based market model. By presenting the costs and benefits of informal currency deals, we discuss the rationale for the market reform in Myanmar. Furthermore, understanding the trajectory of the foreign exchange market serves as the basis for an investigation of the root causes of Myanmar’s persistent informal currency deals in the post-exchange rate unification period. This analytical narrative contributes to the literature on foreign exchange policy reforms in developing countries.

Keywords

Informal currency deal Interfirm-based forex market Bank-based forex market Exchange restriction Myanmar 

References

  1. Agenor, P. R., & Haque, N. U. (1996). Macroeconomic management with informal financial markets. International Journal of Finance and Economics, 1(2), 87–101.CrossRefGoogle Scholar
  2. Ariyoshi, A., Habermeier, K., Laurens, B., Otker-Robe, I., Canales-Kriljenko, J. I., & Kirilenko, A. (2000). Capital controls: Country experiences with their use and liberalization. Occasional Paper 199. Washington, DC: International Monetary Fund.CrossRefGoogle Scholar
  3. Bank for International Settlements (BIS). (various issues). Triennial Central Bank Survey of foreign exchange and derivative market activity. Basel: Bank for International Settlements.Google Scholar
  4. Buehn, A., & Eichler, S. (2011). Trade misinvoicing: The dark side of world trade. The World Economy, 34(8), 1263–1287.CrossRefGoogle Scholar
  5. Canales-Kriljenko, J. I. (2004). Foreign exchange market organization in selected developing and transition economies: Evidence from a survey. IMF working paper WP/04/4. Washington, DC: International Monetary Fund.CrossRefGoogle Scholar
  6. Collier, P. (2007). The bottom billion. New York: Oxford University Press.Google Scholar
  7. Diamandis, P., Kouretas, G., & Zarangas, L. (2007). Dual foreign currency markets and the role of expectations: Evidence from the Pacific Basin countries. Research in International Business and Finance, 21(2), 238–259.CrossRefGoogle Scholar
  8. Ding, J. (1998). China’s foreign exchange black market and exchange flight: Analysis of exchange rate policy. The Developing Economies, 36(1), 24–44.Google Scholar
  9. Eichengreen, B. (2001). Capital account liberalization: What do cross-country studies tell us? World Bank Economic Review, 15(3), 341–365.CrossRefGoogle Scholar
  10. Fischer, S. (2001). Exchange rate regimes: Is the bipolar view correct? Journal of Economic Perspectives, 15(2), 3–24.CrossRefGoogle Scholar
  11. Ghosh, A. R., Gulde, A.-M., & Wolf, H. C. (2002). Exchange rate regimes: Choices and consequences. Cambridge, MA, and London: MIT Press.Google Scholar
  12. Grosse, R. (1992). Colombia’s black market in foreign exchange. World Development, 20(8), 1193–1207.CrossRefGoogle Scholar
  13. Henry, P. B. (2007). Capital account liberalization: Theory, evidence, and speculation. Journal of Economic Literature, 45(4), 887–895.CrossRefGoogle Scholar
  14. Hori, M., & Wong, Y. C. (2013). Costs of Myanmar’s multiple exchange-rate regime. Journal of International Trade and Economic Development, 22(2), 209–233.CrossRefGoogle Scholar
  15. International Monetary Fund (IMF). (various issues). Annual report on exchange arrangements and exchange restrictions. Washington, DC: International Monetary Fund.Google Scholar
  16. IMF. (1999). Exchange rate arrangements and currency convertibility: Developments and issues, world economic and financial surveys. Washington, DC: International Monetary Fund.Google Scholar
  17. IMF. (2003). Exchange arrangements and foreign exchange markets: Developments and issues, World Economic and Financial Surveys. Washington, DC: International Monetary Fund.Google Scholar
  18. Kenen, P. B. (Ed.). (1998). Should the IMF pursue capital-account convertibility? Essays in International Finance No. 207. Princeton, NJ: Princeton University.Google Scholar
  19. Kiguel, M., & O’Connell, S. A. (1995). Parallel exchange rates in developing countries. World Bank Research Observer, 10(1), 21–52.CrossRefGoogle Scholar
  20. Kubo, K. (Ed.). (2017). Dollarization and de-dollarization in transitional economies of Southeast Asia. Cham: Palgrave Macmillan.Google Scholar
  21. Luca, C. (2000). Trading in the global currency markets. Paramus, NJ: Prentice Hall.Google Scholar
  22. Lyons, R. (2001). The microstructure approach to exchange rates. Cambridge, MA, and London: MIT Press.Google Scholar
  23. McKinnon, R., & Schnabl, G. (2004). The East Asian dollar standard, fear of floating, and original sin. Review of Development Economics, 8(3), 331–360.CrossRefGoogle Scholar
  24. Mehran, H., Quintyn, M., Nordman, T., & Laurens, B. (1996). Monetary and exchange system reforms in China: an experiment in gradualism. IMF Occasional Paper No. 141. Washington, DC: International Monetary Fund.Google Scholar
  25. Montiel, P. J., Agenor, P.-R., & Haque, N. U. (1993). Informal financial markets in developing countries: A macroeconomic analysis. Oxford and Cambridge, MA: Blackwell.Google Scholar
  26. Myat Thein. (2004). Economic development of Myanmar. Singapore: Institute of Southeast Asian Studies.Google Scholar
  27. Nguyen, T. P., & Nguyen, D.-T. (2009). Exchange rate policy in Vietnam 1985–2008. ASEAN Economic Bulletin, 26(2), 137–163.CrossRefGoogle Scholar
  28. Reinhart, C. (2002). A modern history of exchange rate arrangements: Parallel markets and dual and multiple exchange rates. Unpublished manuscript, University of Maryland.Google Scholar
  29. Reinhart, C., & Rogoff, K. (2004). The modern history of exchange rate arrangements: A reinterpretation. Quarterly Journal of Economics, 119(1), 1–48.CrossRefGoogle Scholar
  30. Turnell, S. (2009). Fiery dragons: Banks, moneylenders and microfinance in Burma. Copenhagen: NIAS Press.Google Scholar
  31. Turnell, S. (2011). Fundamentals of Myanmar’s macroeconomy: A political economy perspective. Asian Economic Policy Review, 6(1), 136–153.CrossRefGoogle Scholar
  32. United Nations (UN Comtrade). (n.d.). UN Comtrade Database. https://comtrade.un.org/.
  33. Williamson, J. (2000). Exchange rate regimes for emerging markets: Reviving the intermediate option. Washington, DC: Institute for International Economics.Google Scholar

Copyright information

© IDE-JETRO 2018

Authors and Affiliations

  1. 1.Institute of Developing Economies, Japan External Trade Organization (IDE-JETRO)ChibaJapan

Personalised recommendations