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exploited by the seller in two ways. By appropriately revealing information or adjusting the reserve price and supply, uncertainty may be reduced, speculative pressures stemmed and collusion limited. hence stemming volatility. On the other hand, auctions give the seller information about private agents' valuations; in signalling demand pressures auctions can be used to enhance monetary 7 management. This- was found to be a principal advantage of the auction in Bolivia (Domigue, 1991). This macro-micro interaction resulting in improved monetary management also enhances the credibility of auctions.

An auction system has significant advanges over the interbank system in allocation of foreign exchange in thin markets. There is no reason to assume that a fair and efficient allocation will occur where predominantly state-owned banks or a highly concentrated commercial banling sector allocate foreign exchange to final customers (after a wholesale auction of export proceeds, or a decentralized purchase of export receipts). Indeed, practice shows otherwise -in a concenatd sector, the banks possess considerable allocational autonomy, with favored customers and bank shareholders first in line. Auctions offer the possibility of restricting entry through a set of rules which reflect development priorities, but stl maintain market-allocation. These rules can be liberalized over time. Thus, for example, foreign exchange for lumiry goods can be limited to repatiated flown capital. The problem of an asymmetic set of importers, diffiated by credit-worthiness and production costs, could be addressed in a number of ways, for instance by clatve caps on allocation for very large users of the limited supply of foreign exchange, at least for a tansitional period.

Thus, the significant advantage of auctions in SSA is that they offer an informaionaly-rich frework and the possibility of gradually liberalizing auction restictions in the progression toward deeper and more competiive financial markets. Unfortunately, associated with this strength is the license it offers goverments to manipulate an auction and to engage in ad hoc interventions. This is the main reason for the current disaffection with auctions amongst some within the donor community. This point has to be addressed squarely, and we believe that there is scope to design trsparent auctions which reduce manipulation by the seller-

> The structure of tAe rest of the pape is as follows. Section 2 gives a typology of foreign exchange auctions in the four countries. A detailed statistical analysis of micro-auction data from the above four auctions is contained in section 3. Section 4 conains a brief macroeconomic interpretation of the auctions' outcome. Section 5 concludes.

# 2. DESIGN CHARACUERISCS OF AUCFIONS IN SSA

The design characteristics for the Zambian, Ugandan, Ghanaian and Nigerian auctions are summarized in Table 1. These case-studies present a wide specum of auction designs and outcomes

> 71t might be argued that a black marke or reign cxchange bureaux markt offes the sam signallig advanages as an auction. This is false: these markm are vey hin markts awd rec the influence of remainig tad restitions and exchangc conols, as well as vaous demand prssur not constmt wih development priorties, such as smuggling aivts.