This thesis provides evidence in favour of the long-run validity of Purchasing Power Parity (PPP) using primarily a linear error correction framework. Through an examination of PPP where proportionality and symmetry are implicitly imposed, it is shown that a selection of twelve EU real exchange rates is stationary on a univariate basis. The contribution here is based on the reconciliation of unit root test outcomes across univariate and panel tests. Following this analysis, the Johansen cointegration procedure is employed to examine whether long-run equilibrium relationships can be identified in systems of real exchange rates. The implications of results found are set out in terms of regional exchange rate policy co-ordination, exchange rate regime appropriateness, and monetary integration. By focussing on interdependent regions that were affected by a major financial shock (Europe: EMS crisis; Latin America: Mexican crisis; South East Asia: 1997 crisis), the real exchange rate dynamics are compared in pre- and post-crisis scenarios.This thesis also presents evidence in favour of PPP by examining the less restrictive scenario where neither proportionality nor symmetry is imposed. Given the fact that most developed economies have highly integrated goods and capital markets and liberalised capital accounts, the failure to find evidence for PPP in previous studies may be due to the exclusion of factors that might reflect the behaviour of capital markets and their influence on the exchange rate. To test this, the traditional nominal exchange rate and domestic/foreign price based system is augmented with an interest rate component. In a tripolar specification, the joint test of PPP and Uncovered Interest Parity (UIP) is found to hold in a system comprising Germany, Denmark and the UK, suggesting well-integrated goods and capital markets and the long-run convergence evident suggests that Denmark and the UK might be suitable for membership of the euro area. This convergence appears to be stronger when short-term interest rates are used as opposed to long-term rates (perhaps since they are not subject to distortions such as taxation and maturity levels). Furthermore, long-rates have been associated recently with an inversion of the yield curve, while evidence to support the yield curve in non-crisis times is mixed. Finally, multivariate and panel cointegration procedures are employed to provide evidence for the suitability of potential future euro area entrants from Central and Eastern Europe in tri-variate systems comprising the euro nominal exchange rate and two price series.

This thesis deals with the development of the monetary and financial system of Ghana during the period 1950-64 and was conceived of as a sequel to "Money and Banking in British Colonial Africa" by W. T. Newlyn and D. C. Rowan. The period itself saw considerable changes in political and economic conditions and aspirations which left their mark on the financial system. Emphasis has generally been placed on the major changes and the work is largely a mixture of historical survey and analysis. The Introductory Chapter deals with the general framework and characteristics of the economy laying emphasis on the changes and modifications which provide the background to some basic developments in monetary and financial practices. Chapters One to Three deal with the 'monetary institutions - the commercial banks and the Currency Board supplanted in 1957 by the Central Bank. Chapter One deals with the commercial banking system. In Chapter Two are examined the functioning of the West African Currency Board, a review of discussions involving the change to a Central Bank and the evolution of Central Banking constitutional arrangements up to 1964. Chapter Three examines the structural development of the Central Bank as exemplified by the gradual gravitation of the Bank into the general economic administration of the nation and as reflected in important movements in the Bank's assets and liabilities structure. Chapters Tour to Six deal respectively with non-bank financial institutions extant at the end of 1964, a general appraisal of the prospects for the development of money and capital markets and a survey of the performances of various special credit schemes organised under governmental auspices. Included in Chapter Six is a survey of Agricultural Credit schemes and general related problems dating back much earlier than 1950. The final Chapter (Seven) is a theoretical analysis of the relationship between the balance of payments, domestic credit operations and the money supply. In this is generally undertaken a review of the literature on these and other questions relcted thereto. Section D of Chapter Seven examines the scope for monetary policy which only took active form in the last year of the period under review. The general argument put forward is that the greatest scope in the immediate future lay in the use of selective reserve requirements as actually employed in April 1964. First the literature on the various bases for computing reserve requirement are reviewed with the special peculiarities of Ghana for appraisal. This is followed by a brief analysis of the credit control regulations actually adopted. A separate chapter on summary and conclusions has not boon incorporated because in a broad study of this kind it would merely lead to repetitions of various ideas and conclusions stated in the text. The institutional arrangements described in the thesis are based on interviews and discussions hold with representatives of the institutions concerned, publications of the Bank of Ghana and the Government Statistician's office and personal knowledge. Statistical data derive mainly from publications of the Bank of Ghana and the Government Statistician. Due to frequent changes in the basis of statistical data as well as revisions it has not been possible in all cases to present data comparable in every sense and covering the whole period under review. As far as practicable revised data have been used sometimes at the expense of presenting figures for the whole review period.

The last two decades or so have witnessed the emergence of a new type of financial intermediaries. That is the establishment of interest free Islamic financial institutions (IFIs). As a result the literature that deals with aspects related to these institutions has grown rapidly. Three main areas have received considerable attention from economists, bankers, jurists of Islamic Jurisprudence and other academics. These are descriptive analysis of how such a system operates, theoretical framework of such a system utilizing modern tools of economic analysis and empirical studies of evaluating certain experiments. As far as the application of quantitative tools to certain problems of these intermediaries is concerned little progress has been made. This study is an addition to the work carried out in that area by discussing the Asset and Liability Management (ALM) problem of Islamic Banks (IBs) and then developing linear optimization models that help managers to decide the structure of assets, liabilities and capital accounts of their intermediaries. In addition, this study also aims to examine thoroughly the way these institutions operate so as the managerial problems of these practices are identified and taken into account in the modelling process. Similarly, the main characteristics that distinguish these intermediaries from interest based banks are identified. The application of the developed models to the data of two practising lBs reveals that the adoption of quantitative approaches to managerial problems of these firms is quite encouraging. In the sense that these techniques have captured some policies pursued by the management of the selected institutions. Moreover, these methods help managers to identify, and concentrate clearly on, the problem to be considered. However, the main requirement which deserves particular attention in the implementation process of these models is to have comprehensive, detailed and properly recorded and prepared input data.

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The purpose of this thesis is to further current knowledge of the Libor Market Model (LMM) in terms of more efficient implementation and extension to include non-lognormally distributed rates. The performance of LMM in pricing and hedging performance of Bermudan swaptions is also compared with Hull-White, Black-Karasinski, and Swap Market Model (SMM) from an Asset-Liability-Management (ALM) perspective. The first study develops an efficient method for LMM implementation and pricing of Bermudan swaption. Following Derick, Stapleton and Stapleton (2005), we constructed recombining binomial trees for the term structure of forward Libor rate using the method developed by Ho, Stapleton and Subrahmanyam (1995). The contribution of this study is twofold: first, we list the assumptions on the volatility under which LMM can be implemented by the recombining tree method. Second, we perform extensive numerical studies I to compare the European and Bermudan swaption prices produced from the rec01pbining tree with those from the Monte Carlo simulation. Our findings lead us to conclude that our recombining tree LMM could be very useful for pricing exotic interest rate derivatives with early exercise feature. Since the Monte Carlo simulation method is more suited for path-dependent options, \~e conclude that the recombining tree method is a useful tool to complement the Monte Carlo simulation method in pricing exotic interest rate derivatives. T~e second study compares the pricing and hedging performance of the LMM against two spot-rate models, namely Hull-White and Black-Karasinski, and the more recent swap market model from an Asset-Liability-Management (ALM) perspective. In contrast to previous studies in the literature, our emphasis here is on ALM and we use hedging performance on Bermudan swaptions to proxy risk management outcome of a portfolio of long term mortgage loans. The focus here is on the differences between the four models (viz. HW, BK, LMM and SMM) instead of the absolute pricing or hedging error of the individual model. The contribution of this study is twofold: first, we are the first to compare the hedging performance of Bemmdan swaptions for a new set of models, viz.,.HW, BK, SMM and LMM. Second, we perform the test in two currencies from an ALM perspective so that our results are valuable in the decision-making of the ALM division of international financial institutions. The third study extends the LMM to relax the assumption of lognormally distributed forward rates. The probabilities of the tree are modified to include different non-lognormal. distributions. The new model is very easy to implement with the addition of one extra parameter to the standard

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