Nonconvertible Currency

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Nonconvertible Currency

A currency that may not be converted into another currency on the foreign exchange market, or that may be converted only in limited amounts. Some countries limit convertibility to prevent citizens from making bad investment decisions in, say, a country experiencing hyperinflation, while a few communist countries issue nonconvertible currencies to protect their citizens from capitalist influences. A nonconvertible currency is generally traded only on the black market. It is also called a blocked currency or an inconvertible currency.
References in periodicals archive ?
Takenaga (2003, 117) sees the inconvertibility problem for Ricardo as one where the process of equalisation of the values of money across the world is disrupted through inconvertible money, as it cannot be exported to re-establish the correct international distribution of precious metals.
Ricardo's method, as for example in the High Price of Bullion (Ricardo 1810), builds his theoretical argument by starting from an analysis of a system with metallic monetary only, moving to a metallic and convertible notes system in order to analyse the dynamics and problems of an inconvertible money system.
Gold, silver or any other suitable commodity-type of money is an equilibrium element or numeraire which satisfies the law of general equilibrium (Walras), whereas paper, inconvertible money is a disequilibrium element or anti-numeraire which breaks the law of general equilibrium.