:: year 7, Issue 20 (Summer 2014) ::
JMBR 2014, 7(20): 259-283 Back to browse issues page
Foreign Exchange Swap in the context of Usury-free Banking for Central Bank Policy Making
Hossein Meisami *, Hamid Zamanzadeh, Asghar Sahmoradi, Farhad Nili
Abstract:   (2820 Views)

Iran’s foreign exchange market has been subject to foreign exchange volatilities. Banks, as well as the imports and exporters, have been affected by these volatilities. Designing foreign exchange Swap contracts, consistent with the interest-free financial system, should help alleviate foreign exchange risks and manage liquidity. For the first time, this paper proposes a way forward in reconciling traditional Swap contracts, used by many central banks around the world, with that of an interest-free financial system. The results, which are based on an analytical-descriptive approach, show that it is possible to revise the contracts of the conventional Central Bank Swap to make it Shariah-compliant. The paper argues that the central bank of Iran could efficiently use this instrument to mitigate foreign exchange volatilities, reduce risks, manage liquidity, and improve monetary policy operations in a cash-constrained environment.

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Type of Study: Empirical Study |
Received: 2014/09/23 | Accepted: 2015/06/24 | Published: 2015/06/24

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year 7, Issue 20 (Summer 2014) Back to browse issues page