Borrowing facilities internationally, Managerial Economics

Borrowing Facilities

If a country's currency is not convertible, it can borrow from countries whose currencies are convertible and use the convertible currencies to make its international payments.  The difference from gold and national convertible currencies is that they are conditional - they have to be repaid.  Borrowing facilities as a source of liquidity have the advantage that they can be expanded to meet the growing demands.  However, the draw-back is that it makes the borrowing country indebted to the lending country, which is sometimes politically undesirable because of the "strings" which may be attached to the loans.

Posted Date: 11/30/2012 5:26:58 AM | Location : United States







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