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Currency Convertibility |
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Currency Convertibility The ease with which a country's currency can be converted into gold or another currency. Convertibility is extremely important for international commerce. When a currency in inconvertible, it poses a risk and barrier to trade with foreigners who have no need for the domestic currency.
Notes: Government restrictions can often result in a currency with a low convertibility. For example, a government with low reserves of hard foreign currency often restrict currency convertibility because the government would not be in a position to intervene in the foreign exchange market (i.e. revalue, devalue) to support their own currency if and when necessary. |
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? Mentioned in | ? References in periodicals archive | |
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Twenty years ago, when even advanced countries were suffering from double-digit inflation, when intrusive foreign exchange control was a source of major economic distortions and wide-spread corruption, to preach the virtues of price stability and currency convertibility was clearly to move the world in the right direction. In those cases where production must occur in the country where the project is taking place, you'd be wise to secure agreements for currency convertibility or exchange. Discussing the present economic conditions in the world, delegates pointed out that policies to improve the climate for business operations had resulted in privatization, reduction or removal of exchange controls, wider currency convertibility, greater repatriation of profits and dividends, and the easing or lifting of price controls. |
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