convertibility


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Related to convertibility: Currency Convertibility

Convertibility

The ability to exchange a currency without government restrictions or controls.

Convertibility

The state of or the ease with which a currency may be exchanged for a foreign currency. Currency convertibility is vitally important in the foreign exchange market; higher convertibility means that a currency is more liquid and, therefore, less difficult to trade. Factors affecting convertibility include the availability of foreign currency reserves in a given country and domestic regulations seeking to protect local investors from bad investment decisions in, say, a currency undergoing a period of hyperinflation. A few socialist governments even issue inconvertible currencies, such as the Cuban peso, in order to protect their citizens from perceived capitalist infiltration. See also: Inconvertibility.

convertibility

the extent to which a financial security such as a FOREIGN CURRENCY or CONVERTIBLE LOAN can be exchanged for some other currency or financial ASSET.

convertibility

the extent to which one foreign currency or INTERNATIONAL RESERVE ASSET can be exchanged for some other foreign currency or international reserve asset.

International trade and investment opportunities are maximized when the currencies used to finance them are fully convertible, i.e. free of FOREIGN EXCHANGE CONTROL restrictions.

References in periodicals archive ?
Full capital account convertibility as the experience of South Korea, Malaysia, Thailand and Indonesia suggests (see for instance, Athukorala, 2002) can lead to massive and unsustainable inflows, followed by, as the risk perception changes, to massive outflows or a flight to quality, leading to a crisis.
Under convertibility, the BCRA retained additional central banking powers, offering lender-of-last-resort facilities, adjusting reserve requirements, and regulating the banking sector.
First, does partial currency convertibility help produce more informed RMB official exchange rates, at least in the long run?
The next section will provide evidence that gold prices are not so inflexible as to render ineffective a system of indirect convertibility into gold.
Buoyant with careful economic management leading to foreign exchange reserves of our $ 2 billion, the Finance Minister pointed out that the main objective of current account convertibility is the creation of greater confidence among foreign investors.
The United States made no commitment to defend the Smithsonian parity for the dollar through intervention or to restore the convertibility of the dollar into gold: Intervention was still left to foreign monetary authorities if they wanted to maintain their new parities.
Other drawbacks are a poor infrastructure, with little being done about it; non-existent currency convertibility and repatriation of profits; and a considerable level of government bureaucracy.
The convertibility regime means the government has a pretty limited set of options," he explains.
Pakistan on Wednesday took another step toward introducing full convertibility of the rupee by replacing multiple official exchange rate with a fluctuating bank rate.
William Woolsey, John Whittaker and Norbert Schnadt, Tyler Cowen and Randall Kroszner, and Hans-Michael Trautwein have described scenarios in which indirect convertibility would have catastrophic consequences [21; 23; 17; 18; 19; 3; 20].
The independent republics have assumed the former Soviet debt and moved to ensure the convertibility of the ruble.
Measuring Transfer and Convertibility Risk" (updates version dated March 15, 2011)