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Foreign Exchange Swap in the context of Usury-free Banking for Central Bank Policy Making (in Persian)

Author

Listed:
  • Meisami, Hossein

    (Iran)

  • Zamanzadeh, Hamid

    (Iran)

  • Sahmoradi, Asghar

    (Iran)

  • Nili, Farhad

    (Iran)

Abstract

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.

Suggested Citation

  • Meisami, Hossein & Zamanzadeh, Hamid & Sahmoradi, Asghar & Nili, Farhad, 2014. "Foreign Exchange Swap in the context of Usury-free Banking for Central Bank Policy Making (in Persian)," Journal of Monetary and Banking Research (فصلنامه پژوهش‌های پولی-بانکی), Monetary and Banking Research Institute, Central Bank of the Islamic Republic of Iran, vol. 7(20), pages 259-283, July.
    • Handle: RePEc:mbr:jmbres:v:7:y:2014:i:20:p:259-283
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    More about this item

    JEL classification:

    • D53 - Microeconomics - - General Equilibrium and Disequilibrium - - - Financial Markets
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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