Exchange control
FOREIGN EXCHANGE CONTROL
Foreign Exchange Control refers to the control of international monetary and economic transactions involving foreign exchange either by government directly or a centralized agency like central bank. These are various forms of controls imposed by a government on the purchase/sale of foreign currencies by residents or on the purchase/sale of local currency by nonresidents. Common foreign exchange controls include: Banning the use of foreign currency within the country
Banning locals from possessing foreign currency
Restricting currency exchange to government-approved exchangers
Fixed exchange rates
Restrictions on the amount of currency that may be imported or exported.
Countries with foreign exchange controls are also known as "Article 14countries," after the provision in the International Monetary Fund agreement allowing exchange controls for transitional economies. Such controls used to be common in most countries, particularly poorer ones, until the 1990s when free trade and globalization started a trend towards economic liberalization. Today, countries which still impose exchange controls are the exception rather than the rule. In this exchange control, free play of market forces is restricted by certain regulative measures in the exchange market. The rate of exchange under this system will naturally be different from one that will exist in the absence of such control. In today’s world economy, almost all the countries in the world have adopted some form of exchange control or other. In some it exists in its extreme form with all its complexities. The control extends over all transactions of international receipts and payments are centralized and all payments are rationed. The countries proclaiming to abolish the exchange control also have some forms of the control. Thus it is difficult in present times to conceive of an economy which is absolutely free from all sorts of exchange control.
Regulation at government level
Foreign Exchange Control refers to the control of international monetary and economic transactions involving foreign exchange either by government directly or a centralized agency like central bank. These are various forms of controls imposed by a government on the purchase/sale of foreign currencies by residents or on the purchase/sale of local currency by nonresidents. Common foreign exchange controls include: Banning the use of foreign currency within the country
Banning locals from possessing foreign currency
Restricting currency exchange to government-approved exchangers
Fixed exchange rates
Restrictions on the amount of currency that may be imported or exported.
Countries with foreign exchange controls are also known as "Article 14countries," after the provision in the International Monetary Fund agreement allowing exchange controls for transitional economies. Such controls used to be common in most countries, particularly poorer ones, until the 1990s when free trade and globalization started a trend towards economic liberalization. Today, countries which still impose exchange controls are the exception rather than the rule. In this exchange control, free play of market forces is restricted by certain regulative measures in the exchange market. The rate of exchange under this system will naturally be different from one that will exist in the absence of such control. In today’s world economy, almost all the countries in the world have adopted some form of exchange control or other. In some it exists in its extreme form with all its complexities. The control extends over all transactions of international receipts and payments are centralized and all payments are rationed. The countries proclaiming to abolish the exchange control also have some forms of the control. Thus it is difficult in present times to conceive of an economy which is absolutely free from all sorts of exchange control.
Regulation at government level