convertibility

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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 ?
Households: Currency convertibility for the households has tremendously improved since Uzbekistan's acceptance of Article VIII.
After unifying the dual exchange rates of the Chinese currency renminbi (RMB) and implementing a managed-float system on January 1, 1994, China formally committed itself to partial currency convertibility, that is, currency convertibility under the current account, in December 1996.
Currency boards, by eliminating monetary policy discretion and offering full currency convertibility, give developing countries a much stronger, more visible arrangement for promoting confidence in their money than do central banks.
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.
If we wish to stabilize the price level by (re-)establishing currency convertibility, we presumably need some other form of convertibility that has not yet been tried in practice.
Vladimir Dlouhy gave his frank assessment of Czechoslovakia's privatization plans and the immense difficulties which the Czech and Slovak Federal Republics face in the next years before aspirations, such as full currency convertibility and entry to the European Community, might be properly addressed.
The collapse of the Soviet Union's economy, coupled with limited hard currency convertibility for the ruble, eliminates the major Eastern European trading partner.
Legislators will further appreciate the Draft Resolutions on the Promotion of Regional Trade through Currency Convertibility and Repatriation and Regional Payment Settlement Systems, the Role of SADC Parliaments in Ensuring a Favorable Environment for Inclusive, Secure and Sustainable Access Youth for Technology and the Promotion of Infrastructure Development and Youth Empowerment for Sustainable Development.
Deducting Bahrain's monetary base from reserves-because S&P views currency convertibility into foreign currency as a requisite for pegged arrangements-results in negative usable reserves.
Likewise, in China, the absence of currency convertibility -- together with a weak financial supervisory framework, which reflects a broader problem related to poor implementation of the rule of law -- is impairing the economy's prospects for leadership.
China intends to establish a special zone in Shenzhen to experiment with currency convertibility, by enabling banks in Hong Kong to lend renminbi directly to in-zone operations, boosting cross-border transactions, according to senior Chinese officials.
In the developed countries, too, trade liberalization, which started earlier in the postwar period, was accompanied by other forms of economic opening (for example, a return to currency convertibility), resulting in rapid GDP growth.