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Inconvertibility |
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Inconvertibility The inability of a local currency to be exchanged for another currency. Often includes transfer risk. Inconvertibility The state in which a currency may not be exchanged for a foreign currency. A few socialist governments issue inconvertible currencies such as the Cuban peso in order to protect their citizens from perceived capitalist infiltration. Most of the time, however, domestic regulators may deem a foreign currency inconvertible in order to protect local investors from bad investment decisions. For example, regulators may deem a currency going through a period of hyperinflation as inconvertible; that way, investors do not make investments in that currency as they are likely to soon be worthless. See also: Foreign exchange. How to thank TFD for its existence? Tell a friend about us, add a link to this page, add the site to iGoogle, or visit webmaster's page for free fun content. |
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We believe China will not be able to achieve any kind of landing (neither soft nor hard) in the next year or two for three reasons: the absence of swift policy responses to rising economic problems; the heightening investment incentive ahead of major political events; and the inconvertibility of the capital account lengthens the duration of the bubble. Political risks include war and revolution, as well as currency inconvertibility, expropriation and changes in import or export regulations. A large investment bank making a loan in Argentina for a major infrastructure project would want to have currency inconvertibility coverage to make sure it can get loan payments out of the country. |
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