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Pakistan’s Parallel Foreign Exchange Market

In a fascinating paper by Asma Khalid (from the State Bank of Pakistan) titled ‘Pakistan’s Parallel Foreign Exchange Market’ published by the Lahore Journal of Economics, we get a unique look at the structure of the parallel foreign exchange market in Pakistan.

The paper gives a comprehensive picture of the structure and evolution of this market in Pakistan. The author starts with a brief historical perspective, which flags the importance of workers’ remittances to the country and explains how the bulk of this inflow is transacted through the hundi/hawala network (informal money changers).

The author then places this network within the context of the larger FX market and shows how it interfaces with the interbank market. The author also discusses how many hundi/hawala agents have evolved into formal exchange companies and list the various sources and uses of FX transacted in the kerb market.

The author concludes by spelling out the importance and resilience of the parallel FX market, the need to push toward full amalgamation with the formal FX market, and the key role of workers’ remittances in Pakistan’s macro-economy

The paper is available in its complete form on the website of the Lahore Journal of Economics here (pdf)

The Lahore Journal of Economics (LJE) is a biannual publication of the Lahore School of Economics and is widely circulated, both nationally and internationally. The LJE is the top-ranked social science journal in Pakistan, and has been given the highest ranking by the Higher Education Commission of the Government of Pakistan. It is widely recognized as the top economics journal in Pakistan. The LJE is also listed on the Journal of Economic Literature (JEL), EBSCO, ProQuest, Library of Congress, and British Library databases.

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posted by S A J Shirazi @ 5/15/2015 02:00:00 AM,

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