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In economics, a dual exchange rate is the occurrence of two different values of a currency for different sets of monetary transactions. [1] [2] One of the most common types consists of a government setting one exchange rate for specific transactions involving foreign exchange and another exchange rate governing other transactions.
A currency board system can ultimately be credible only if central bank holds official foreign exchange reserves sufficient to at least cover the entire monetary base. Exchange rate movements cannot buffer external shocks. A fixed peg system fixes the exchange rate against a single currency or a currency basket. The time inconsistency problem ...
An exchange rate regime is a way a monetary authority of a country or currency union manages the currency about other currencies and the foreign exchange market.It is closely related to monetary policy and the two are generally dependent on many of the same factors, such as economic scale and openness, inflation rate, the elasticity of the labor market, financial market development, and ...
Currency intervention, also known as foreign exchange market intervention or currency manipulation, is a monetary policy operation. It occurs when a government or central bank buys or sells foreign currency in exchange for its own domestic currency, generally with the intention of influencing the exchange rate and trade policy.
The exchange risk arises when there is a risk of an unfavourable change in exchange rate between the domestic currency and the denominated currency before the date when the transaction is completed. [1] [2] Foreign exchange risk also exists when the foreign subsidiary of a firm maintains financial statements in a currency other than the ...
A cross-currency swap's (XCS's) effective description is a derivative contract, agreed between two counterparties, which specifies the nature of an exchange of payments benchmarked against two interest rate indexes denominated in two different currencies. It also specifies an initial exchange of notional currency in each different currency and ...
Currency conversion fees, also called foreign currency exchange fees, come in two forms. Both involve charges for converting one currency to another during an international transaction. Credit ...
In layman's terms, full capital account convertibility allows local currency to be exchanged for foreign currency without any restriction on the amount. [citation needed] This is so local merchants can easily conduct transnational business without needing foreign currency exchanges to handle small transactions.