Exchange requirements-, Financial Management

Assignment Help:

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.

 


Related Discussions:- Exchange requirements-

Calculate tax gain or loss, High Tech Production Inc. purchased a comp...

High Tech Production Inc. purchased a computerized measuring device two years ago for $80,000. This equipment falls into the five-year category for MACRS depreciatio

Define weight refer to in weighted average cost of capital, What does the “...

What does the “weight” refer to in the weighted average cost of capital? The weight considered to in weighted average cost of capital consider the portion of the total capital in

Show the disadvantages of adjusted discount rate, Q. Show the Disadvantages...

Q. Show the Disadvantages of adjusted discount rate? (1) The risk premium rates resolute under this method are arbitrary. Therefore this method mayn't give objective results.

Calculate remaining balance, Your family purchased a house three years ago....

Your family purchased a house three years ago. When you bought the house you financed it with a $160,000 mortgage with an 8.5% nominal interest rate (compounded monthly). The mortg

International strategic management, undertake a critical review of the curr...

undertake a critical review of the current academic literature to determine the reasons for benefits of and the costs to companies of cross listing.

Operating cycle, Explain the operating cycle of a vegetable growing busines...

Explain the operating cycle of a vegetable growing business

Explain the procedure for cost benefit analysis, Question 1: i) Pe...

Question 1: i) Performance budgeting is the best budgeting system. Discuss. ii) Why there is a need for implementing MTEF in the Mauritian Public Sector? Questi

Explain about the non-convertible debentures, Expalin about the Non-Convert...

Expalin about the Non-Convertible Debentures (NCDs) NCDs are plain debenture securities issued by corporations. They are normally medium term in nature, maturing between 1 to 8

Which ratios would a banker be most interested, Which ratios would a banker...

Which ratios would a banker be most interested in when considering whether to approve an application for a short-term business loan? Explain. Bankers and another lenders use li

Define analysis of proforma reveal positive & negative trend, What action(s...

What action(s) should be take place if analysis of pro forma financial statements reveals positive trends?  Negative trends? While analyzing the pro forma statements, managers fre

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd