Have Reforms Established Transmission Channels of Exchange Rate Policy in Myanmar?

While Myanmar moved to a floating exchange rate regime from a fixed exchange rate regime in April 2012, parallel market transactions of foreign exchange remained pervasive. This paper investigates the question whether the reforms have established a transmission channel of exchange rates from the formal to parallel markets. The empirical results of VAR analysis with the daily exchange rates indicate that the Central Bank has been following the parallel rate rather than guiding it, implying that a transmission channel is yet to be established.