Some countries pass laws restricting the legal exchange rates of their currencies or requiring permits to exchange more than a certain amount. Some currencies, such as the North Korean won
, the Transnistrian ruble
, and the Cuban national peso
, are officially nonconvertible and can only be exchanged on the black market
. If an official exchange rate is set, its value on the black market
is often lower.
Convertibility controls may be introduced as part of an overall monetary policy
. For example, restrictions on the Argentine peso
were introduced during an economic crisis in the 1990s and scrapped in 2002 during a subsequent crisis.
Historically, the banknote has followed a common or very similar pattern in the western nations. Originally decentralized and issued from various independent banks, it was gradually brought under state control and became a monopoly privilege of the central banks. In the process, the principle that the banknote was merely a substitute for the real commodity money (gold and silver) was gradually abandoned.
Under the gold exchange standard
, for example the Bretton Woods Institutions
, banks of issue were obliged to redeem their currencies in gold bullion
, or in United States dollars, which in turn were redeemable in gold bullion at an official rate of $35 per troy ounce
. Due to limited growth in the supply of gold reserves, during a time of great inflation of the dollar supply, the United States eventually abandoned the gold exchange standard and thus bullion convertibility in 1974.
- ^ "Currency Convertibility". Investopedia. Retrieved 8 June 2010.
- ^ Grabianowski, Ed. "How Exchange Rates Work". HowStuffWorks. Retrieved 8 June 2010.
- ^ Quispe-Agnoli, Myriam; Kay, Stephen. "Argentina: The End of Convertibility". Federal Reserve Bank of Atlanta. Retrieved 8 June 2010.
Last edited on 2 March 2021, at 00:46
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