Effectiveness of foreign currency auction system in stabilising foreign exchange rates in Zimbabwe.

Author

Chihaka, Lloyd

Title

Effectiveness of foreign currency auction system in stabilising foreign exchange rates in Zimbabwe.

Abstract

The study sought to investigate effectiveness of foreign currency auction system in stabilising foreign exchange rates in Zimbabwe. The paper looked at the impact of the Central Bank regulated Foreign Currency Auction System on the exchange rate in Zimbabwe. The exchange rate comprised of both the official interbank rate derived from the auction rates and the parallel exchange rate. The study adopted a descriptive research design and judgmental sampling was used to select the respondents. The study took a hybrid approach to research where both qualitative and quantitative methodologies were used. The target population constituted of 400 participants and stratified sampling and simple random sampling methods were used. The researcher made scheduled interview appointments with participants through the telephone and questionnaires were administered electronically and by hand. The participants constituted of mainly retail banking managers, economic analysts and other senior officers of commercial banks and bureau de change institutions. A thematic approach was adopted to come up with pure assumptions about the nature of the data, reality and presentation of the important themes about data in relation to the research questions. The study revealed that the auction system is falling short of market demands, Zimbabwe faces a severe foreign currency shortage in the formal sector due to inadequate foreign exchange liberalization thus making it difficult to stabilise the exchange rate. The major drawback of this auction system are the assumptions that there is effective demand and supply and that major economic players will solely depend on the formal regulated market for forex. The central bank, however need to efficiently allocate forex funds to active importers and impose directives which are independent of exchange controls to improve such a system.

Date

2022

Publisher

BUSE

Keywords

Effectiveness

Foreign currency

Exchange rates

Supervisor

N/A