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
D esign, Drawing and Bill of Quantities (BOQ) for works We discussed about INCO terms which are set standards for the project. Now let us learn about other parameters for cont

Q. Describes the methods of Capital Budgeting? Capital Budgeting: - Capital Budgeting is the procedure of making decisions for investment in long-term assets. It is a method of

Which is lower for a given company:  the cost of debt or the cost of equity?  Explain: Ignore taxes in your answer . The cost of debt is all the time less as compared to the cost

A procedure that invented in the 1980s for evaluating the processes of a business to find strengths and weaknesses. Specially, activity-based management finds out areas where a bus


Explain how to resolve a "ranking conflict" between the net present value and the internal rate of return.  Why should the conflict be resolved as you explained? Whenever there

Typically, there exist two types of bids in the treasury auction process. They are: Competitive bid and non-competitive bid. A non-competitiv

For a specified IOS and MCC, how do financial managers decide that which proposed capital budgeting projects to accept, and which to reject? For a specified IOS and MCC, all inde

FUNCTIONAL AREAS OF FINANCIAL MANAGEMENT The scope of financial management is all pervasive and covers approximately all the functional areas of an organization. A number of t

Corporate Governance features Corporate compliance: The BOD should make sure that corporation obeys with all related laws, governance practices, regulations, accounting an