Exchange requirements-, Financial Management

Exchange Requirements

To ensure money supply, some central banks require some or all of its foreign exchange receipts (generally from exports) be exchanged for the local currency. The rate that is used to purchase local currency may be market-based or arbitrarily fixed by the bank. This is generally applied in the countries where the currency is non-convertible or partially convertible.

The need for this tool is that the recipient of the foreign currency on conversion to local currency may easily dispose of these funds, may hold the funds with the central bank for some period or may be allowed to use these funds with certain restrictions. In simple words, the means to hold or use the foreign exchange may be otherwise limited.

Under this policy tool, money supply tends to increase when the central bank purchases the foreign currency by issuing/selling the local currency. This increase can be subsequently controlled through various issuances like selling bonds, foreign exchange interventions, etc.

Major Central Banks: Every country or a group of member states, for example European Union, shall have a central bank. Some of the major Central Banks are:

  • The US Federal Reserve
  • The Bank of England
  • The Reserve Bank of India (1935)
  • The Bank of Japan
  • The Deutsche Bundesbank
  • The Bank of Canada
  • The Reserve Bank of Australia
  • The European Central Bank.

 

Posted Date: 9/11/2012 2:58:12 AM | Location : United States







Related Discussions:- Exchange requirements-, Assignment Help, Ask Question on Exchange requirements-, Get Answer, Expert's Help, Exchange requirements- Discussions

Write discussion on Exchange requirements-
Your posts are moderated
Related Questions
Write the format to place the order. What are the risks involved in the delivery of products. Format of the order: ? Purchase order ? Acknowledgement form ? Material requisitio

1. The standard approach here is to calculate some conventional ratios. These ratios can afterwards be used along with regression analysis to estimate the default probability.

Project your company's income statement and assets for five years. Identify your assumptions for major categories. Determine how you will finance your balance sheet (long-term de

Shareholders' wealth maximization Shareholders' wealth maximization refers to maximization of the net present value of every decision made in the firm. Total present value is e

Financial Control: - The establishment as well as use of financial control devices is an important function of financial management. These devices comprise: Budgetary Contro

What kinds of U.S. companies would benefit most from a stronger dollar in the foreign exchange market?  Explain. U.S. companies that import merchandise from other countries wou

Q. Calculate the optimum amount of funds to transfer? The Baumol model is derived from the EOQ model and is able to be applied in situations where there is a constant demand fo

Continuing growth of the company has required that we issue the company''s corporate debt soon. As you know, in 6 months we plan to issue $10 million worth of 20-year corporate bon

discuss the applicability of an operation cycle in a vegetation business

Q. Describe Factors to Analyze a Company position? - Venture capitalists may be involved in the business because of its significant growth but poorly structured finance. An equ