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# _5._ CONCLUSIONS AND POLICY **LESSONS.**

The experience of foreign exchange auctions in SSA has been one of rich and diversified design features, policy interventions and outcomes. This paper has compared and contrasted auction designs and outcomes across four SSA countries and produced a typology of SSA foreign exchange auctions. Two distnct sets of countries have been identified in temLs of design features, auction policies and outcomes. Ghana and Uganda represent a set where auctions have been judged to be largely on taget in terms of the three policy objectives of exchange rate unification, stabilisation of the exchange rate and an efficient allocation of foreign exchange. On the other hand, the auctions in Zambia and Nigeria were subject to frquent policy interventions, with the consequence of unsustainable auctions, inefficient allocation through ad hoc disqualifications (at least in Zambia), lImited unification, and a rather volatile exchange rate. Ihe condusions of this analysis are broadly corroborated by a statistical analysis of the micro-auction data for all four countries. A summary of the main stylised facts and their possible explanations foilowFirst, auction prices have been fairly stable in Ghana and Uganda, while in contrast they have been rathr volatile in Zambia and Nlgeria. Stability of prices improved around a deprecating trend in Ghana as the auction progresed from a retail to a wholesale auction. In Zambia, price stability decreased from the competitive to the Dutch auction; while in Nigeria the reverse was true, perhaps due to the effect of stable supply. Empirical evidence on the depature from normality of hie differenced auction rate is provided by skewness test on auction data All fbur countries show marely asymmetric auction rates; Nigeria and Zambia have a significa tendency toward left skewness (apreciation), while Ghanaand Ugandadisplay apronounced tendency towards depreciation (right skewness). For all countries, appreciation or depreciation tends to show a very hi,gh order of magnitude for the absolute value of highest appreciation or depreciadon relative to the average rate of change. Thus, departure from symmetry is not trivial when it it is statsticaUy significant. Further, excess kurtosis is significant in all data in all auctions, which implies a high probability of extem observatio in both tails of the distrbution of auton data Kurtosis measures do not offer any criteria for differendating between the countries, but reinforce the point that the standard deviation is not a useful measure of exchange rate variability given these deparures from normality.

An explanation for increased stability in our first set of countries is that Ghana and Uganda used (unannounced) reserve prices, while Zambia and Nigeria did not This "crawling peg" type system prevented appreciation in the presence of disqualifications. At the same time the depreciation path of the exchange rate was smoothed as bidders learnt the reserve price rle, which is perhaps evidenced by the dramatic fal-off of dhe bid-spread over time in Ghana and Uganda. Furhermore, in Ghana and Uganda, not only were the paralel markets legal (bureaux markets), but the macropolicies followed were relatively consistent: ese two facts allowed the bureaux rate to constitute a credible and efficient secondary market signal for the reserve price rule. It would be interesting to test the observed differences in exchange rate depreciation across regimes, such as Dutch and competitive pricing, or retail and wholesale auctions.