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
SAM Technology had AED 640,000,000 of retained earnings on December 31, 2012. The company paid common dividends of  AED 30,000,000 in 2012 and had retained earnings of  AED 500,000

Question1 Analyse the financial requirements of a FMCG company Question2 If you are an investor and are interested in finding out the value of an amount of Rs 10,000 to be re

Zero base budgets: this is a new technique, which was first used by the US Department of Agriculture in 1961. Texas instruments, an MNC, have used it in the private sector.  But,

Types of Mortgages 1. Traditional Mortgages 2. Non -  Traditional Mortgages 3.  Graduated-Payment Mortgages (GPMs) 4.  Pledged-Account Mortg

What is the annual tax shield to a firm that has total assets of $80 million and a net worth of $55 million, if the average interest rate on debt is 8.5% and the marginal tax rate

how I can use this website?

The production department in any firm is concerned with provision of production facilities, production cycle, skilled and unskilled labor, storage of finished goods, capacity utili

You plan to borrow $125,000 at a 9.5% annual interest rate. The terms require you to amortize the loan with 10 equal end-of-year payments. How much interest would you be paying i

Hi I have been working in this for 2 weeks now and I just can''t seem to figure it out. ok lets say Bill is 40 yrs old. His made 72,000 last year had 60,000. in annual expenses,

These types of securities have more than one coupon rate and each subsequent coupon rate is higher (or lower) than the previous coupon rate. For