What is the current exchange rate related to? Exchange rate and its types. So, the term “currency” has a threefold concept
The formation of stable relations regarding the purchase and sale of currency and their legal consolidation historically led to the formation of national and then world currency systems.
National currency system- this is the form of organization of a country’s currency relations, determined by its currency legislation. Peculiarities NBC is determined by the degree of development and specifics of the economy, as well as foreign economic relations of a particular country.
NBC includes track. basic components:
National day unit (national currency);
Composition of official gold and foreign exchange reserves;
Parity of national currencies and the mechanism of exchange rate formation;
Conditions for the reversibility of national currencies;
The presence or absence of currency restrictions;
The procedure for implementing mejunar. country calculations;
Regime of the national foreign exchange market and gold market;
National authorities servicing and regulating the country's currency relations.
Very The degree of currency convertibility is important for the characteristics of the system, i.e. the degree of freedom of its exchange for foreign currency (freely convertible, partially and non-convertible (for more details, see the previous ticket). Currently, only the currencies of the leading industrialized countries are fully convertible, in most countries there are certain restrictions. Russia has already achieved the convertibility of the ruble for current transactions . Full convertibility of the ruble is possible only with a deep structural restructuring of the country's economy. The national currency is exchanged for the foreign currency of another country at parity - a certain ratio established by law. For the functioning of the currency system, the exchange rate regime is important. 2 polar regimes: fixed (sometimes fluctuations within a narrow framework... in my opinion, the Russian ruble is in a certain corridor) and freely floating (developed under the influence of supply and demand).
The national currency system of Russia is state legal form of organization and regulation of its monetary, credit and financial relations with other countries. It is an integral part of the country's monetary system. This system is in the process of formation and has not yet been fully formed. However, its contours and main trends have emerged quite clearly. At the end of the 90s, the Russian institutional currency mechanism, in terms of its main parameters, almost approached the criteria inherent in Western countries.
The national monetary system of Russia was formed taking into account the structural principles of the world monetary system, since the country seeks integration into international financial mechanisms and joined the IMF in June 1992. Recognition of the Fund's charter imposes on it certain obligations regarding the structure of its monetary system. Let's consider the main elements of the modern Russian currency system.
1. The basis of the currency The system is the national monetary unit - the Russian ruble, introduced into circulation in 1993. and replaced the USSR ruble.
2. Since the beginning of economic reforms, Russia has actually introduced internal, i.e. only for residents (legal entities and individuals of a given country), ruble convertibility on current balance of payments transactions. At the same time, currency restrictions were established on financial transactions of residents.
3. The ruble exchange rate is not officially pegged to any Western currency and currency basket. A floating exchange rate regime has been introduced in Russia.
4. An element of the Russian currency system is regulation international currency liquidity, those. primarily official gold and foreign exchange reserves, which are used to ensure interstate settlements and regulate the exchange rate of the ruble.
5. Regarding the next element of the monetary system - international credit circulation, then our country has long been guided by unified international standards that regulate the use, in particular, of bills and checks.
6. Regulation of international payments Russia is also carried out in accordance with the Uniform Customs and Practice for Documentary Credits and Collections.
8. In Russia The domestic gold market is being formed, precious metals and precious stones.
9. In Russia a legal and institutional regulatory mechanism has emerged activities of national bodies for managing foreign exchange relations, conducting foreign exchange policy and foreign exchange regulation. This regulation is carried out in three main directions.
The main directions of currency regulation and currency control in the Russian Federation:
Customs and banking control over the receipt of foreign exchange earnings from export operations;
Exchange control over the validity of payments in foreign currency for imported goods;
Implementation of currency control during barter transactions;
Implementation of currency control in non-trade turnover.
Exchange rate- the relationship between 2 currencies (the price of one currency expressed in denominated units of another country), which is established by law or develops on the market under the influence of supply and demand.
In theory there are 5 exchange rate systems:
1. free (clean) swimming ; The exchange rate is determined by the influence of supply and demand for currency.
2. guided swimming ; supply and demand also have an impact. But here the regulatory power of the central banks of countries is very noticeable, as well as various kinds of market fluctuations.
fixed rates; The fixed exchange rate system was the Bretton Woods currency system (1944 - early 70s).
3. target zones ; is a type of fixed exchange rate system. An example is the fixation of the Russian ruble to the US dollar in the corridor established by the Central Bank of the Russian Federation.
4. mixed exchange rate system . - is a modern international shaft system.
Two alternative exchange rate regimes
1. fixed
2. floating.
In the process of evolution of the world monetary system, there was a transition from fixed to floating rates. Currently, each country independently chooses the regime for setting exchange rates. On this basis, the International Monetary Fund classifies currencies into one of the following three categories:
1) tied to one or a number of currencies;
2) with limited flexibility;
3) increased flexibility.
In Russia use several types of exchange rates ruble:
- official rate of the Bank of Russia. Since May 1996, the Bank of Russia refused to link the official ruble exchange rate to the MICEX fixing. The official exchange rate began to be determined on a daily basis, based on the supply and demand of currency on the interbank and exchange foreign exchange markets. In the context of the financial crisis, it began to be determined during two-section trading in foreign currency on the MICEX;
- exchange rate - ruble exchange rate on stock exchanges;
- commercial banks rate(commercial banks licensed by the Bank of Russia to conduct foreign exchange transactions independently quote foreign currencies in rubles). Banks set buying and selling rates at which they exchange foreign currencies into rubles and back. Rates for cash and non-cash payments are set separately;
- auction rate - this is the ruble exchange rate at foreign exchange auctions;
- black market rate;
- cross courses - quotation of two foreign currencies, neither of which is the national currency of the party to the transaction, or the ratio of two currencies, which follows from their exchange rate in relation to any third currency. For example, at the Bank of Russia exchange rate as of January 22, 2000, 1 dollar = 28.44 rubles, 1 German. stamp = 14.79 rub. One is German. mark = 14.79/28.44 = $0.5200
During the financial crisis, the Central Bank of the Russian Federation began to set the official exchange rate in a new way. Since October 1998, all currency exchanges in the country began to hold two sessions: in the morning - a special trading session, during which only exporters and authorized banks could sell currencies; The Central Bank also took part in this session; in the afternoon - a regular trading session, based on the results of which the official rate was determined.
Essentially two exchange rates were established: one - for exporters and importers, the second - for everyone else. The Central Bank excluded a number of large commercial banks from participating in trading, which destabilized the situation in the foreign exchange market.
In 2000 The exchange rate policy of the Bank of Russia is carried out using the floating exchange rate of the ruble to foreign currencies. The Bank of Russia did not establish any specific parameters for changes in the exchange rate either for the year as a whole or in its individual periods. Main smoothing tool excessive fluctuations in the ruble exchange rate were interventions in the domestic foreign exchange market. One of important goals of the Bank's policy Russia was accumulation of gold and foreign exchange reserves and maintaining them at a level that ensures confidence in the ongoing monetary policy and stability of the Russian monetary and financial system.
The main legislative act in the field of currency relations of the Russian Federation is the Law “On Currency Control and Currency Regulation”, as well as other laws and regulations.
The Bank of Russia establishes and publishes official exchange rates of foreign currencies against the ruble.
Central banks carry out foreign exchange policy to maintain the market rate of national monetary units. Their role boils down mainly to preventing sharp fluctuations in the exchange rates of national money and keeping them within certain boundaries. The Central Banks regulate the activities of commercial banks in conducting foreign exchange transactions and take measures against excessive speculation in the foreign exchange markets. State through the central bank determines the norms for the sale and purchase of currencies, regulates loans in foreign currency and carries out other types of intervention in the foreign exchange transactions of banks.
Currency market– a segment of the financial market in which transactions for the purchase and sale of foreign currency are made in cash and non-cash forms.
Exchange rate(exchange rate) – the price of a foreign currency in national monetary units (with the direct method of setting the exchange rate). The opposite presentation is called a reverse course.
Determining the exchange rate of a national currency in foreign currency at a certain point in time is called quotation. Currency quotes are carried out by the world's central and largest commercial banks.
Types of exchange rates:
Fixed exchange rate- this is the official rate that does not change, at least for a certain fairly long period.
Limited moving rate – the establishment by monetary authorities of limits on exchange rate fluctuations, which they seek to maintain mainly through foreign exchange interventions, i.e., operations in foreign exchange markets using reserves of key currencies.
Free floating rate – should not be regulated by state and interstate bodies, but set by the market.
On exchange rate influenced by factors that reflect the state of the economy of a given country: 1. Economic growth indicators (gross national product, industrial production volumes, etc.). 2. The state of the trade balance, the degree of dependence on external sources of raw materials. 3.Growth of money supply in the domestic market. 4.Inflation level and inflation expectations. 5. Interest rate level. 6. Solvency of the country and confidence in the national currency on the world market 7. Speculative operations in the foreign exchange market. 8.The degree of development of other sectors of the global financial market, for example the securities market, which competes with the foreign exchange market.
Question 21
Evolution of the world monetary system. The role of gold in the international monetary system.
Evolution of the world monetary system
There are different numbers of stages in the development of the world currency: from two to four. The most traditional point of view is that the world monetary system has gone through the following main stages during its existence, each of which was characterized by the presence of certain internationally agreed upon principles of monetary and financial policy:
Gold standard (Paris system).
Gold-motto standard (Genoese system).
System of fixed parities (Bretton Woods system).
Modern system of freely floating exchange rates (Jamaican system).
The principles developed at the international level provide the basis for national monetary authorities to determine their own financial policies. There are numerous examples in history of deviations from global principles, but in general they determine the most characteristic features of the development of world and national finance, primarily the methods of establishing and regulating exchange rates.
Gold standard system (1867-1914). In the early stages of the formation of the world monetary system (XVII–XVIII centuries), currencies were exchanged in accordance with their “metallic content,” which simplified the problem of determining the exchange rate. In different countries, different metals were used for minting coins: copper, silver, gold (as well as nickel, tin, lead and iron), but precious metals served as a measure for determining exchange rates. In the 19th century, one part of the countries focused on the use of gold as a measure of the value of their monetary units, the other part - silver. In France, bimetallism dominated, so it was here that the idea arose to ensure uniformity in determining exchange rates.
At the Paris Conference (1867), gold was recognized as a form of world and national money. All functions of money were assigned to it at the international level. The monetary system based on the gold standard (“golden monometallism”) included the following basic principles:
gold is the only form of world money;
gold circulates freely, which meant:
central banks of individual countries can sell and buy gold in unlimited quantities at fixed prices;
any person can use gold without any restrictions;
any person may mint gold coins from gold bullion at the government mint;
The import and export of gold was not limited.
These conditions applied to both residents and non-residents of individual countries.
The advantage of using gold as world money is the relative stability of such a “currency” due to the fact that gold practically does not wear out, so the nominal and metallic value of the coins are the same. A significant disadvantage is the inflexibility of gold as a medium of exchange. That is why, in fact, bills of exchange (drafts) denominated in the most stable and popular currency of that period, the English pound sterling, began to play this role. Gradually, gold was replaced as a means of payment by credit money. Gold was mainly used to pay off the country's public debt when its balance of payments was in deficit. In addition, the pound sterling was used on an unofficial basis as a reserve currency.
The gold standard meant the establishment of a gold content for each national currency (the amount of gold per unit of national currency), through which the official exchange rates of currencies in relation to each other can be easily determined. Since these courses are based on gold content, they talked about gold parities. Despite the existence of a gold standard, market rates were also formed under the influence of the relationship between supply and demand on the market. When market rates deviated significantly from gold parities, payments began to be made in gold, which brought these rates into line with the official ones. At the same time, the transition to payments in gold became profitable when the so-called gold points. Thus, if the market exchange rate of the national currency in relation to the foreign currency has decreased to a level at which it becomes more profitable to pay for imported goods in gold than in foreign currency, then they say that they have reached the golden point of export. The golden point of entry is determined similarly.
During the 70s of the 19th century, France, Germany and many other countries switched to the gold standard, which led to excess demand for gold and a deflationary process in these countries. At the same time, the demonetization of silver created an oversupply and inflationary pressure in countries that maintained the silver standard. The choice between gold and silver was finally decided once and for all during the discovery of large gold deposits in South Africa. In 1900 most leading countries, with the exception of China, have firmly committed themselves to the gold standard.
The gold standard system ensured the stability of most currencies for a long period of time and contributed to the development of world trade. Under the gold standard, national currencies were freely exchanged at a fixed rate for gold, the quantity of which was limited. If an increase in the amount of money within the country led to an increase in prices, then this caused a trade deficit, an outflow of gold from the country, a reduction in the amount of money in circulation, a fall in prices and the restoration of balance sheet equilibrium. Of course, this scheme for automatically restoring balance is simplified, and in practice it worked with adjustments.
Currency crisis (1914-1922). The short era of the international gold standard was interrupted by World War I and inflation in Europe, which forced the warring countries off the gold standard. The US, which along with Japan maintained the gold standard, was flooded with gold. This caused the value of the dollar and gold to double. The regulatory mechanism of the gold standard ceased to function. Factors that contributed to the destruction of the gold standard system were:
a significant increase in the issue of paper money to cover military expenses;
the introduction by the warring parties of currency restrictions, due to which the existence of a single international monetary system became impossible;
depletion of gold resources while financing military expenditures.
Gold motto standard (1922-1939). In 1922 At the Genoa Conference, an attempt was made to restore the principles of the gold standard system, but in a modified form. According to the decisions of this conference, national credit money could be backed not so much by gold, but mainly by the foreign currency of those countries that retained the free exchange of their monetary units for gold, i.e. British pound sterling, French franc and US dollar. Other currencies were not exchanged for gold directly, but through a preliminary exchange into one of the three specified currencies. The gold standard remained in force only at the international level. Free coinage of gold by any persons was no longer possible, i.e. switched to closed coinage. At the same time, a transition was made from gold coin standard to gold bullion
But, despite the decisions made in Genoa, in fact the period from 1924 to 1936. characterized by widespread demonetization of gold in national monetary systems. The demonetization of gold means depriving it of all or part of its “currency” functions, primarily the refusal to use it as a measure for determining the exchange rates of national currencies, a means of circulation and payment. A number of countries made attempts in one form or another to restore the gold exchange standard (England - in 1925, France - in 1928) or create gold blocs (for example, between France, Holland, Switzerland, Italy and Poland - in 1933), and the gold reserves of many countries, especially the United States and France, increased sharply. However, as a unified world system, the gold-motto standard, unlike the gold standard, did not function.
The global economic crisis of 1929–1933 had a significant impact on the IFCS, which led to:
to sharp capital flows and, as a consequence, disequilibrium of balances of payments and fluctuations in exchange rates;
to the paralysis of international credit with the cessation of payments by a number of debtor countries, which caused the emergence of separate currency zones (for example, in Germany);
to the refusal of many countries from the gold-motto standard and the recognition of other principles of the world monetary system.
During the First World War and after it, the United States accumulated huge gold reserves, so that the gold coating of banknotes in circulation, for example, in 1933, i.e. in the year the US went off the gold standard, more than double the security required by law. The USA was a country in which until 1933. Bank notes were freely and in any quantity exchanged for gold. However, the need to bring the American economy out of a deep economic crisis caused the appearance of a US presidential decree, according to which the country prohibited the storage and circulation of gold coins, bars and certificates, and soon a ban was introduced on the export of gold abroad.
The pound sterling continued to play a leading role as an international means of circulation, although the gold backing of the American dollar was higher. This was due to the existence of a developed system of English banks abroad (mainly colonial banks), which objectively led to the opening of accounts, the provision of loans and, as a consequence, settlements in pounds sterling.
After 1934 The world monetary system did not correspond to the principles that were its basis. During this period, only the United States guaranteed a fixed price for gold (35 USD per troy ounce) and agreed to exchange dollars for gold, but only for Central banks. Many countries expressed the price of their currencies in dollars (in terms of the troy ounce). The result was the gradual transformation of the dollar on an unofficial basis into a reserve currency and the displacement of the pound sterling in this function.
Currency crisis (1939–1944). During the Second World War, there was no single foreign exchange market and the principles of the world monetary system were not respected. The most characteristic features in its development were:
currency restrictions imposed by most belligerents and many neutral countries;
a new increase in the role of gold as world money, since in war conditions strategic and scarce goods could only be purchased for gold;
the associated depletion of gold reserves of countries that were actively purchasing weapons and food, and their accumulation from exporting countries, primarily the United States;
loss of the regulatory role of exchange rates in economic relations;
the use by the occupying countries, in addition to direct methods of robbery, also of monetary and financial ones (issuance of unsecured money for formal payment for supplies of raw materials and food from occupied countries, overvaluation of the national currency).
Bretton Woods monetary system (1944 - 1971). Caused by the Second World War and previous events, the global currency crisis forced Anglo-American experts to develop a draft of a new world monetary system, the principles of which were consolidated at the monetary and financial conference in Bretton Woods (USA). In the adopted agreement (first edition of the Charter IMF) the following basic principles of the new monetary system were identified:
Recognition of gold and the US dollar as the basis of the world monetary system. This meant the restoration of gold parities of currencies with their fixation at IMF, the continued use of gold as an international reserve and means of payment, the preservation of the gold-dollar standard established before the Bretton Woods system (35USD per troy ounce), for which the US Treasury continued to exchange dollars for gold at a set price for Central banks and government agencies. Other currencies could now only be exchanged for gold through USD. Devaluation of currencies over 10% was allowed only with permission IMF.
Introduction of a currency corridor. The market exchange rate was supposed to deviate from the established parity within narrow limits (±1%), and the responsibility of central banks was to maintain this “corridor” on the basis of foreign exchange interventions. They had to accumulate USD reserves for this. If the national currency fell, then central banks released dollar reserves onto the market. Otherwise, they bought USD. In fact, this situation meant shifting the costs of maintaining the dollar exchange rate onto the national banks of other countries, which was a manifestation of US hegemony in world monetary relations. In addition, the obligation to accumulate dollar reserves led to the strengthening of the American currency.
Easing currency restrictions with the introduction of mutual convertibility of currencies, as well as restrictions on the export of capital and obligations to sell currency to Central banks.
It should be noted that these principles led to the inconsistency of the Bretton Woods currency system, since maintaining fixed rates requires, to one degree or another, control over foreign exchange transactions. In fact, within the framework of the IFCS, a system of limited mobility rates was introduced. Therefore, the often used name of this system as a “system of fixed parities” is not entirely legitimate.
For the first time in history, international monetary and credit organizations were created for interstate regulation of currency relations - the International Monetary Fund ( IMF) and the International Bank for Reconstruction and Development ( IBRD) 5 . The tasks of these organizations are discussed in detail in paragraph 15.2.
The final settlement of balances of payments between countries was actually carried out by exchanging gold for currency and vice versa, either centrally (by Central Banks and other official institutions) or in the London gold market.
A monetary system based on the key role of one currency (USD) could remain stable only under the hegemony of the United States in the world economy, which at the end of the 40s accounted for about 75% of the world's gold reserves, more than 50% of industrial production and 30% of exports capitalist countries.
Prerequisites and causes of the crisis of the Bretton Woods system. Signs of the crisis of the world monetary system under consideration matured gradually and began to appear especially clearly in the 60s. These include:
in the late 40s and early 50s, Soviet foreign trade organizations began to transfer dollar proceeds from American bank accounts to European banks;
at the end of the 50s, a sharp weakening of the GBP exchange rate began to be observed, which forced English banks to switch to conducting operations (opening accounts, providing loans, settlement and payment transactions, etc.) in USD;
in the late 50s and early 60s, Keynesian methods of regulating the economy began to be implemented in the United States, among which one of the main places was limited to interest rates; this reduced the investment attractiveness of the country for both non-residents and residents, and caused an outflow of capital from the United States.
The formation of a huge US balance of payments deficit due to the fact that for various reasons there was an outflow of dollars from the country, which caused their accumulation in the reserves of both central and commercial banks. This process led to the formation of the so-called Eurodollar market. Factors that contributed to the formation of the Eurodollar market were:
Gradual overcoming by many countries of the technological and economic lag behind the United States with a decrease in the latter’s share in global industrial production and world gold reserves. Using the dollar, which is also depreciating, as the basis of the monetary system has become illogical.
The actual use of other currencies along with the dollar as reserves, primarily the German mark, the Swiss franc and the Japanese yen, i.e. currencies, the market rate of which at that time tended to strengthen.
The right of owners of dollar reserves to exchange them for gold at the official price by the end of the 60s came into conflict with the ability of the United States to carry out this exchange.
The official price of gold, which was lowered in the interests of the United States (for its mass purchase), which served as the basis for currency and gold parities, began to deviate from the market price. As a result, artificially established parities lost their economic meaning.
Periodically, there were sharp fluctuations in exchange rates relative to each other, which is associated with the cyclical development of the world economy and the instability of balances of payments. Countries such as Germany and Japan had consistently positive balances of payments in the 60s, while the USA and England had negative balances, which did not correspond to the official role of their currencies in the Bretton Woods system. Maintaining a permissible band of exchange rate fluctuations was associated with significant costs and was not in the interests of countries whose currencies were more stable.
Forms of manifestation of the crisis of the Bretton Woods system. The forms of manifestation of the crisis of the system under consideration are closely related to the causes of the crisis and were expressed in the following:
“currency fever” (“flight” to stable currencies);
“gold rush” (massive purchase of gold and, as a result, an increase in its market price);
worsening of the problem of international liquidity (general shortage of international means of payment and their uneven distribution between individual countries);
revaluation and devaluation of currencies due to the impossibility of maintaining their exchange rates within established limits;
massive use of borrowings in IMF to mitigate balance of payments deficits;
panic on stock exchanges with sharp fluctuations in securities prices (they depend significantly on exchange rates).
At the end of the 60s, the dollar exchange rate began to fall sharply due to a significant increase in their supply in order to exchange for gold, there was an uncontrolled movement of dollars bought by central banks to maintain the exchange rates of their currencies at the established IMF limits. The United States has long resisted recognizing the bankruptcy of the Bretton Woods system and tried to shift the costs of saving it to other countries. Among such measures is the revaluation of some currencies, tantamount to a hidden devaluation of the dollar, but not so damaging to prestige; increase in import duties; stopping the exchange of dollars for gold.
Attempts to preserve the basic principles of the system of fixed parities include the Agreement of 10 countries, signed in December 1971. in Washington (Smithsonian Agreement), according to which:
the dollar was devalued (by 7.89%), and the official price of gold was increased to $38 per ounce;
official rates of a number of currencies were changed;
the permitted limits for currency exchange rate fluctuations were expanded (up to ±2.25%);
The newly introduced import duty in the United States (10%) was canceled.
At the beginning of 1973, another devaluation of the dollar was carried out (by 10%) and the official price of gold was increased (to $42.22 per ounce). However, since these measures did not fundamentally change the system itself, its crisis could not be overcome, and from March 1973 a decision was made to abandon fixed exchange rates. But the full principles of the new system were formulated later, so the period 1971–76. can be defined as transitional.
Modern world monetary system (since 1976). In accordance with the principles of the Jamaican monetary system, any country that is a member of the International Monetary Fund (IMF) has the right to independently choose its exchange rate regime. However, certain requirements by the IMF Charter as amended in 1978 were introduced:
maintaining the stability of financial and monetary policy in the country and using Central Bank interventions when the exchange rate fluctuates too much;
refusal to manipulate the exchange rate aimed at obtaining unilateral advantages;
prompt notification to the IMF about all proposed changes in the mechanism of foreign exchange regulation and exchange rates;
refusal to link the exchange rate of its currencies to gold.
At the same time, gold was deprived of its official functions international means of payment, a measure of the value of currencies, a mandatory reserve asset of central banks, i.e. demonetized. But in practice, countries can, if they wish, accumulate gold reserves, and also pay in gold by mutual agreement. Thus, the freedom to choose the exchange rate regime is not absolute. Nevertheless, the transition to independent choice of the exchange rate regime by countries meant that its interstate regulation was significantly weakened.
Therefore, at present, various national currency regimes have emerged, which, nevertheless, can be classified according to certain general principles (Fig. 1).
Fig 1. Varieties of modern exchange rate regimes (according to the revised IMF classification 6)
Tied are currencies, the change in exchange rate of which is determined by changes in the exchange rate of the currency or basket of currencies to which the link is made. A basket of currencies means a set of currency values recognized by a number of countries (standard basket) or one country (individual basket), for which the weighted average value is calculated according to certain rules. Below, using the example of SDR, this will be shown in more detail. In the case of a link to a specific currency, fluctuations in the rate of the linked currency completely repeat the fluctuations in the rate of the leading currency. When linking to a standard basket, in some cases a deviation of ±1% is allowed.
Sometimes pegged currencies are called fixed-rate currencies. This is not entirely accurate, since the fixation is carried out in relation to one currency (or basket), and in relation to other currencies there is free floating. The overwhelming number of pegs are to the US dollar (more than 20 currencies). This is due to the leading role of the US dollar in world markets. But there are also individual examples of pegging to other currencies, for example, the Estonian kroon and the Romanian leu - to the EUR (formerly - DEM), the currencies of Namibia, Lesotho and Swaziland - ZAR (South African currency), etc. A peculiar situation has developed in the French franc zone (14 countries) in which the currencies XAF and XOF are used with the same exchange rate. Previously, these currencies were pegged to the franc, now to the euro. Thus, we can talk about collective currencies that are pegged to another collective currency. Linking to a standard basket of currencies is carried out in relation to the international monetary unit – SDR (for example, Libyan pound, Rwandan franc, etc.).
Oriented These are currencies that are not strictly linked to other currencies. Thus, there are a number of currencies (for example, the Qatari rial, the Bahraini dinar and the Saudi Arabian rial), the official rates of which are pegged to the US dollar, but at the same time a corridor is maintained within ±2 1/4%. In fact, here we can talk about preserving the Bretton Woods principles in a mini-version, but with the difference that there is no talk of a gold standard.
Until 1999 corridor-bound swimming was carried out in EMU. Exchange rates in it were determined through the central rate ECU with a permitted fluctuation band of ±15% (from 1979 to 1999 - mainly ±2.25%). This system was also called cooperative, since the countries included in it pursued a single monetary policy. However, with the transition of most EMU countries to a single currencyEUR, it is more logical to define this system as a system of collective currency. Since the EUR rate floats freely in relation to most other currencies, the EMU (within the EUR zone) can now be classified as a currency system with a floating rate.
To currencies from moving course include those for which strict limits of fluctuations are not established. However, this does not mean that the state under no circumstances interferes in the course formation process. In this case, the intervention can be quite active in nature (daily or weekly adjustments with the sale or purchase of currency by central banks at the established rate). In this case they talk about controlled or controlled swimming. If adjustments to the exchange rate are sporadic and are carried out mainly in emergency cases, for example, during sharp drops or increases in the market rate of the national currency, then they speak of independent systems. These include, in particular, the US dollar, Canadian dollar, and Japanese yen.
In recent years, specific currency regimes have begun to appear in countries that have abandoned their national currency in favor of a foreign one, or have recognized foreign currency as legal tender in the country along with the national currency. This applies to countries such as Ecuador and Panama, which use USD as their national currency (Panama also has its own national coins, the BalboaPAB).
A short review of exchange rate regimes suggests that the modern world monetary system is not entirely correct to define as a system of floating rates, as is often claimed. It would be more correct to talk about a system of free choice of exchange rate regimes.
The IMF approval is also closely related to the legal demonetization of gold in the IMF as the official reserve and means of payment of the SDR. According to the original plan, this unit was supposed to replace gold in IMF relations with its members and among themselves.
Already in the early 60s, a lively discussion began in a number of industrialized countries about the insufficiency of the available international means of payment - at that time mainly USD and gold. It led to the IMF decision begin issuing new international monetary units, which for the first time in history were created on the basis of an international agreement. In 1978 in connection with the decreasing role of gold in the world monetary system in the IMF Charter The goal was fixed to turn the SDR into the main reserve instrument, for which the scope of application of this unit was expanded, and attractive rates on loans in SDR were established.
However, the implementation of this goal is complicated by a number of circumstances:
the impossibility of full control by the IMF over the use of other elements of international liquidity;
the emergence of a multi-currency reserve system (not only USD);
increasing freedom of movement of capital, and, as a consequence, the volume of international transactions.
SDRs are non-cash accounts that can only be held by the IMF itself, countries participating in the SDR system, and the so-called other holders. Participation in the SDR system is voluntary. Since 1980 All IMF member countries participate in it. Other owners may include issuing banks that perform their tasks for more than one IMF member, as well as other official institutions. Individuals cannot be SDR account holders. They can use this unit only as a counting unit, for example, expressing the denomination of a security in SDR or indicating the contract amount for the supply of goods in this unit. However, payments must be made in some currencies.
In financial relations the IMF with its members, SDR is used as a means of payment for contributions to the fund, repayment of loans, as well as for the payment of interest on loans. IMF can fulfill its obligations to the creditor country instead of SDR currencies, as well as replenish the reserves of countries with this monetary unit. Member countries can use their existing SDR reserves without political or economic obligations. It was found that IMF members can, in case of financial need, buy other currencies with SDR. In this case, they must contact the IMF, which determines which countries participating in the SDR system can be purchased from and organizes the exchange process.
Exchange rules, called designing, were established by the IMF and were registered in its Charter. It is considered unacceptable to use SDR during design only for the purpose of changing the structure of the country's reserves, i.e. without the intended use of purchased currencies. SDRs cannot be directly used for interventions in foreign exchange markets, but must first be exchanged into some currency in such cases. However, since 1987 no design transactions took place.
Countries participating in the SDR system are required to purchase this currency in the amounts established by the IMF. At the same time, the IMF takes into account the financial situation of countries and seeks to initially attract to the purchase of SDR those of them that have sufficiently strong reserve and payment positions, and distributes obligations for the purchase of SDR among them evenly.
For a certain time, the rule for the reconstitution of the minimum established volume of SDR was in effect, according to which, in the event of spending SDR, countries were obliged to restore this volume after a certain time through new purchases of SDR. However, since 1981 it was cancelled.
SDR are created in the process of posting new releases. There are two methods of placement: general and one-time placement.
In case of general placement, newly issued SDR are allocated among all participating countries in proportion to their share (quota) in the authorized capital of the IMF. Such an operation is carried out no more often than once every 5 years by decision of a qualified majority of the Board of Governors (at least 85% of the votes). The largest recent offering took place on January 1, 1981, bringing the total to 21.4 billion. SDR.
A special one-time placement can be made among a limited number of IMF members, for example, in the case of joining the IMF new members. In September 1997, the IMF Board of Governors put forward a proposal for additional placement, taking into account the fact that more than 20% of IMF members have never participated in a placement before. However, for the proposal to take effect, it is required that at least 3/5 of the IMF members vote for this decision with a total vote of 85%. This situation has not yet materialized. However, if the decision is made, then the number SDR will almost double.
In the total volume of international reserve payment funds SDR are less than 2% (excluding gold), which is due to the limited nature of the use of this unit. Thus, SDR primarily used not as an international reserve facility, but as an official unit in IMF relations with member countries.
The possibilities for using SDR have gradually expanded. In particular, they include: fulfillment of financial obligations under international treaties; use in swap transactions; providing loans; collateral transactions and donations. As already noted, some countries link their currency rates to the SDR. The circle of other owners who are granted the right to carry out all permitted transactions with SDR is expanding. Currently, this includes about 20 institutions, including, for example, the World Bank, the Bank for International Settlements, the Swiss National Bank and others.
Setting the SDR interest rate and assessing its exchange rate. Initially, the SDR was defined in the Charter as 0.888671 grams of pure gold, which corresponded to 1 USD, but with the abolition of gold parity, the need to determine the gold content of SDR was no longer necessary. Since SDR is not traded on foreign exchange markets, it does not have a market price like national currencies. Therefore, to determine the price of SDR, they use the method of a basket of four major world currencies (USD, EUR, GBP, JPY). Each currency is assigned its own relative weight, which is determined by the following indicators:
The country's share in world exports of goods and services.
Use of currency as a reserve medium by various countries.
The list and currency weights are revised every 5 years based on these indicators.
Every working day IMF re-evaluates the SDR rate for the currency basket, taking into account market rates of the corresponding currencies in relation to the USD. In table 1. An example of course evaluation is provided. SDR. Formula for determining the exchange rate SDR as follows:
(3)
d i – relative weight of currency i;
SR i (USD) – direct exchange rate of USD against currency i, that is, the cost of this currency in US dollars.
Similarly, the course SDR can be defined in any other basket currency.
The use of the basket method allows, to a certain extent, to smooth out exchange rate fluctuations to which the rates of individual currencies are subject, and, consequently, reduce exchange rate risk. For this reason SDR is actively used for the denomination of financial assets not only by the IMF itself, but also by other international organizations and firms. SDR They are also used in multilateral interstate agreements as a counting unit.
The fund accrues interest on the SDRs allocated to the participants of the system, and, conversely, pays interest on the SDRs provided to it. Interest rate since 1981 corresponds to the weighted average of short-term interest rates in countries whose currencies are included in the SDR basket. The interest rate is revised weekly.
The modern role of gold in the global monetary system. With the second change to the IMF Charter (1978) the role of gold changed fundamentally. It began to matter only as one of the assets, but still quite significant, since the IMF, due to previous gold payments, has quite large reserves (more than 100 million ounces). All institutions in participating countries can transact in gold at free market prices. IMF has two options for using gold, which requires a majority decision of 85% of the members. First, IMF gold can be sold at book value (1 ounce = 35 SDR) to countries that were members of the IMF by the end of 1975 (restitution of gold reserves). Secondly, the fund can sell gold to member countries or on the market at the market price. The additional revenue received in this case in excess of the accounting value is credited to special account (Special Disbursement Account– SDA). Regular loans can be issued from this account to improve the balance of payments of members IMF, assistance to developing countries, including in the form of interest subsidies.
Between 1976 and 1980, the IMF sold 1/3 of its previous gold reserves (about 50 million ounces). A significant portion of market sales of gold reserves IMF(28%) was sent as grant assistance to a large number of developing countries in proportion to their quota in the IMF. The remaining proceeds were transferred to Trust Fund (Trust Fund) , created in 1976 as a special asset managed by the IMF to carry out a program for the sale of gold in favor of developing countries even before the approval of the second amendment to the IMF Charter. However, funds for the benefit of this fund also came from the IMF's income on invested capital, from donations, in the form of funds from the sale of gold, which were not in demand by a number of developed countries. 55 of the poorest countries received assistance from the Trust Fund. After the last loans were made, the Trust Fund ceased to exist in 1981. Interest and principal from that time forward went into the SDA account.
The further role of gold in the global monetary system will depend on how countries manage their still significant gold reserves (over 900 million ounces or 27 thousand tons). In the European Monetary System, part of the reserves in the European Monetary Cooperation Fund and subsequently the European Monetary Institute were contributed in the form of gold. With the creation of the European Central Bank, the latter's reserves are formed from the foreign exchange reserves of the euro area member countries, but at the same time the central banks of these countries retain the right to maintain and increase their gold reserves.
The ruble exchange (currency) rate is the price of our monetary unit (ruble), expressed in the monetary unit of another country. The exchange rate appeared along with the need for exchange: for the import and export of goods and capital. The peculiarity of the modern exchange rate is that it reflects the ratio of such economic factors as the growth of the Gross National Product (GNP) per capita, the growth rate of production volumes, the development of foreign trade, price dynamics, the state of money circulation, the level of interest rates, the development of forms and methods of currency regulation. The exchange rate reflects not only the impact of external factors on the economy, but also its changes, which indicates the role and effectiveness of the participation of the national economy in the global division of production factors.
Exchange rates are divided into two main types: fixed and floating. The fixed exchange rate fluctuates within a narrow range. Floating exchange rates depend on market supply and demand for a currency and can fluctuate significantly in value.
Fixing the ruble exchange rate in a foreign monetary unit is called a currency quotation. In this case, the ruble exchange rate can be set both in the form of a direct quotation (1, 10, 100 units of foreign currency = X units of the ruble) and in the form of a reverse quotation (1, 10, 100 units of the ruble = X units of foreign currency). For professional participants in foreign exchange markets, the concept of “exchange rate” simply does not exist. It breaks down into two rates: the buyer's rate and the seller's rate.
The buyer's rate is the rate at which a resident bank buys foreign currency for a ruble, and the seller's rate is the rate at which a resident bank sells foreign currency for a ruble.
For example, 1$ = 28.00/88 rubles means that a commercial bank of Russia is ready to buy 1 dollar ($) from a client for 28.00 rubles, and sell it for 28.88 rubles.
With a direct quotation, the seller's rate is higher than the buyer's rate.
The difference between the rate of the seller and the buyer is called the margin, which covers costs and forms the bank’s profit on foreign exchange transactions. Obviously, any bank is interested in the lowest possible buyer's rate and the highest possible seller's rate, and only fierce competition, the fight for the client, forces banks to act in the opposite direction. Reducing margins and attracting customers allows you to win a lot of profits.
One of the most important concepts used in the foreign exchange market is the concept of real and nominal exchange rates.
The real exchange rate can be defined as the ratio of the prices of goods of two countries, taken in the corresponding currency.
The nominal exchange rate shows the exchange rate currently in effect on the country's foreign exchange market.
An exchange rate that maintains constant purchasing power parity: This is the nominal exchange rate that keeps the real exchange rate constant.
The nominal exchange rate is an indicator of the relative value of the monetary units of two countries, or the expression of the money of one country in the currency of another. Essentially, the nominal exchange rate shows how much money one country needs to spend to buy the currency of another country. An increase in the nominal exchange rate indicates that the money used in a particular country is becoming more expensive relative to other types of currencies. If the monetary unit, on the contrary, becomes cheaper, then the exchange rate falls. Nominal exchange rate: essence, calculation The nominal exchange rate reflects the real relationship between the money (currencies) of different countries. Setting the exchange rate for a domestic currency expressed in foreign money is called a quotation. In this case, the rate can be determined in the form of a direct quotation (unit - foreign monetary unit) and indirect (reverse) quotation (unit - national currency). So, in the first case, the exchange rate is indicated as follows - for 1 US dollar - 63 rubles, and in the second - for 1 ruble - 0.015 dollars. In practice, indirect quotation is used in Britain (in relation to the pound) and in the USA. The real exchange rate is the ratio in which the products (goods) of one state can be sold in exchange for the products (goods) of another state. Thus, the real exchange rate reflects the ratio of prices for products abroad and within the country, provided they are expressed in the same currency. The real exchange rate is calculated using the following expression: where e is the nominal exchange rate; Pt -...
Currency intervention is the central bank's targeted influence on the exchange rate, carried out through the purchase or sale of large quantities of foreign currency. Here it is worth delving into the theory: the Central Banks of different countries accumulate foreign exchange reserves - the national currencies of prominent market players that have high liquidity (hence, there can be no problems with their sale). When the need arises to support the national currency, the Central Bank makes a large sale of foreign currency (for example, dollars). The value of the national currency rises sharply relative to the one that was sold. Here is an example of how an intervention is reflected on a chart (Japan, 2011): Experts compare currency intervention to “artificial respiration” for the national economy. This method is resorted to only as a last resort, when the others have already proven their ineffectiveness. Types of currency interventions There are several classifications of intervention. The most common is the following: Open. The Central Bank reports the exact amount and time of the transaction. Verbal. This method is misinformation. The Central Bank announces its intention to intervene, after which the market begins to move and volatility increases. However, if intervention does not occur, the price quickly returns to its usual value. Indirect. The most unpredictable option, since the intervention is carried out by commercial banks at the direction of the Central Bank. Traders especially do not like such interventions, because they give rise to fairly rapid price movements and introduce nervousness into trading. Interventions vary in the number of participants. Stand out: Unilateral. Such interventions often turn out to be ineffective or ineffective, since the desires of one...
The exchange rate is usually called the value of the monetary unit of a state, which is expressed in the monetary unit of another state. Currency convertibility is its free exchange for other monetary units, as well as services and goods. It is impossible to imagine modern economic activity without currencies. A freely convertible currency is a currency that is applicable for all settlement transactions. In the state of such a currency there are no restrictions on foreign exchange transactions. If a country has any restrictions on transactions with currency, then such a monetary unit is called non-convertible. In the case where only special restrictions apply to some exchange transactions, the currency is considered partially convertible. Freedom of currency conversion is based on the stability of the economic situation of the state and absolute confidence in the national currency. The main feature of a freely convertible currency is the setting of the monetary rate during open trading on the currency exchange, when the state cannot introduce a currency corridor or limit the price of the monetary unit. The exchange rate of currencies is based directly on currency parity. Currency parity Currency parity is the ratio between two different currencies established by government legislation. Currency rates very rarely coincide with their own parity. Payments and receipts in foreign currency are almost never in equilibrium. Such fluctuations depend on many factors of a political, structural, and legal nature. The most important of them are: the state of the trade balance; the size of the financial mass; national income; discount rates; expected inflation rate; government regulation. The balance of supply and demand determines...
A fixed exchange rate is a type of exchange rate in which the value of a national currency is maintained within certain limits of value in relation to the US dollar. In this case, the exchange rate is determined on the foreign exchange market, and the Central Bank is engaged in maintaining equilibrium in this market. This is achieved by regulating supply and demand. To fix the exchange rate, it is necessary to comply with the agreement on the gold parity, or it is also possible according to an international treaty. If agreement occurs on the first principle, then the exchange rate is set in accordance with the proportions of the gold content in the country. National governments regularly set official exchange rates, which are then published in special bulletins. If we take Russia, we will see that here the Central Bank of the Russian Federation sets the official ruble exchange rate, which is used to calculate state budget revenues and expenses, as well as for all monetary transactions of the country.
Historical exchange rate is the recorded state of the exchange rate at the time of the obligation or acquisition of an asset. The historical exchange rate allows the parties to fix and regulate the financial side of the transaction by concluding a preliminary agreement. Thus, the parties to the transaction protect themselves from changes in the exchange rate, fixing it at a certain historical level. The role of the historical exchange rate in the world of finance The historical exchange rate plays a huge role in the fleeting asset market, allowing transactions and obligations to be quickly recorded, with guaranteed currency quotes. This process allows you to stabilize the market, make transactions by prior agreement, and develop a transaction with already fixed historical currency quotes. In the absence of historical exchange rates, the financial side of the transaction would fluctuate throughout the process of its full implementation. Since the modern foreign exchange market is characterized by regular significant fluctuations in currency quotes relative to each other. Thus, the majority of ongoing transactions would be in jeopardy due to an unfavorable change in currency quotes for one of the parties. Advantages of using the historical exchange rate Fixing the financial side of the transaction - allows you to fix the state of the financial market at the time the transaction begins; Stabilization of transactions - the process takes place with the fixation of the main points of the transaction, without changes due to fluctuations in the financial market; Thus, the use of the historical exchange rate helped the development of the asset market, regular growth in transaction turnover, and a decrease in the number of failed transactions.
The exchange exchange rate is the price at which currency is currently being purchased and sold on the exchange. Buy cheaper - sell more expensive, the exchange does not allow this. The rate is constantly changing, however, it is impossible to move away from it during financial transactions. The place where trading takes place involving buying and selling is called a foreign exchange exchange. It is here that individuals and legal entities try to sell or purchase a certain currency at the most favorable rate for them. The main task of any exchange is low profit, but the mobilization of foreign exchange resources that are temporarily freely available, their redistribution, setting the correct exchange rate for all currencies, based on legal trade. Exchanges are designed to determine the true exchange rate of exchange. What does the stock exchange rate depend on? The exchange exchange rate depends on a number of factors: the number of inflations and their forecasts; the rate depends on purchasing power; on the country’s GDP, ND, GNP, etc. indicators; the country's policy in terms of the national currency; level of confidence in a particular currency; the country's balance sheet solvency; on the level of supply and demand in the foreign exchange market. The exchange rate is needed to establish the exact proportionality of the purchasing power of currency during trade turnover and exchange of services, capital movements, which are expressed in the form of loans, as well as investments. It is also necessary to be able to compare prices for goods on the world market, revaluate the accounts of banks, governments and individuals in...
The use of multiple exchange rates is a measure of foreign exchange regulation that states resort to in the event of crisis phenomena in the economy. A multiple system is characterized by the presence of several rates at which the national currency is exchanged. The difference between them can be manifold. Different rates may apply for exports and imports, for the public and private segments. Entire product groups can be differentiated. As a rule, imported food products, medicines, and basic necessities fall into the category with a preferential rate. In this case, the special regime for exchanging national currency acts as a government subsidy. The increased exchange rate, on the contrary, is a kind of income tax and is applied to a group of goods classified as non-priority during the crisis. Thus, the variability of quotations of the national currency acts as an analogue of the system of taxes and tariffs. Multiple exchange rates can also be established in order to reduce the outflow of foreign exchange reserves from the country, reduce government costs for purchasing foreign currency to service external debt, and increase export revenues. In some cases, the introduction of several exchange options can also act as an experienced tool for determining the optimal rate for the economy of the national currency. Multiple exchange rates are typical for countries with economies in transition and developing countries. Its introduction is temporary and is eliminated after the national currency convertibility is introduced. History of the multiple currency system For the first time, multiple rates were established after the introduction of currency restrictions during the global crisis in...
Exchange rate regulation is maintaining a stable exchange rate of one currency against another, or changing this rate without sudden jumps that will negatively affect the economic state of business in the country. The exchange rate is regulated by various methods. Before considering and analyzing them, let us introduce the concept of a currency regime. Exchange rate regime is the maintenance of a stable exchange rate relationship for money. Do not confuse the exchange rate regime with the simple expression “price of money”; here the emphasis is placed precisely on the exchange transaction, the exchange ratio of one monetary unit to another. To move on to an overview of methods of currency regulation, we will first consider in detail the main types of currency regimes. Types of exchange rate regimes distinguished by the economy today The floating exchange rate regime is suitable for currencies that are freely convertible into one another. A floating rate is a variety of exchange rates that go through many changes throughout the day. The full peg regime begins to work in the case when one country’s currency is not freely convertible. As a result, to ensure economic stability and access to the global market, such countries must peg their currencies to convertible currencies. For example, the country of Ecuador pegged its currency to the dollar; there are a great many similar examples around the world. Fixed rate mode. This regime is established by the Central Bank of the state if the currency system is able to afford it. According to the fixed rate, the exchange...
The exchange rate is the value of the state's currency, which is expressed in the national currency of another country. The exchange rate is an important element of the monetary system, since with the development of the world economy and international relations, a certain measurement of the price relationship between the currencies of different countries is required. In other words, the exchange rate is the rate at which one currency can be exchanged for another. When traveling to another state, citizens are forced to purchase local currency. Like the value of any asset, the exchange rate is the purchase price of a given currency. The Bank of the Russian Federation sets the official exchange rate for foreign currencies in relation to the ruble every day (or every month, but without the obligation to buy or sell the specified currency at the established rate). This is predetermined by a special Regulation of the Central Bank dated April 18, 2006. For clarity, if, for example, you need to go to Egypt, and for American dollars the exchange rate is 1 to 6.5 Egyptian pounds, this will mean that for each dollar you will have to six and a half pounds. It is worth noting that identical assets are required to be sold at the same value in different countries, since the exchange rate is designed to support the values that are inherent in one currency over another. Determining the exchange rate The exchange rate is necessary for: comparing the value of world and national markets, price indicators of different countries, which are expressed in foreign or national currency; mutual monetary exchange...
Currency parity is the ratio established between two currencies in accordance with legal requirements. This is a kind of base for the exchange rate, as well as the ability to express the monetary unit of one country in the monetary unit of another country. At the moment, there are two regimes for the exchange rate: fixed exchange rate; floating exchange rate. Modern conditions create a course that is based on parity. In other words, this is the relationship between currencies, which is established according to legal regulations and has slight fluctuations. According to the amended statute, parities can be established using any currency unit. Parities in the 70s Compared to the current situation, in the 70s parity was established only using a basket of currencies. It had several varieties: standard - with a fixed composition; regulated according to exchange rates; symmetrical, having the same weight of currencies; asymmetrical, based on different shares of currencies. Exchange rate and purchasing power parity The presented method of measuring exchange rates shows how the transition from the dollar to multi-currency units occurs. Parity is established based on a basket of currencies, which contains several currencies and is determined by the relative weight of each of them. The ECU was used as a basis for currency parity, and they were reproduced in the currency basket of more than twelve countries. Price comparison Taking into account the theory of purchasing power, it can be seen that the exact determination of rates is made taking into account the comparison of prices between consumer goods from...
Currency market – a financial market where foreign currencies are exchanged. Currency (“price, cost”) is the country’s monetary unit.
Any national monetary unit is a currency and acquires a number of additional functions and characteristics as soon as it begins to be considered from the perspective of a participant in international economic relations.
From the point of view of material form currency is any payment document or monetary obligation expressed in one or another national monetary unit, used in international payments (banknotes, treasury bills, checks, bills, letters of credit).
These payment documents are bought and sold on the foreign exchange market.
The national regime for regulating foreign exchange transactions for various types of transactions for residents and non-residents determines the degree of currency convertibility.
Currencies can be divided into 3 groups:
1. Freely convertible currencies (FCCs) are the currencies of those countries where there are no restrictions on foreign exchange transactions for any type of transaction (trade, non-trade, capital movement) for residents and non-residents.
2. Partially convertible currencies (PCC) - currencies of those countries where there are quantitative restrictions or special permitting procedures for currency exchange for certain types of transactions or for various subjects of the transaction. PCI has the characteristic of internal or external reversibility. Internal convertibility means that residents of the country can buy foreign currency without restrictions and make payments with foreign partners. External convertibility - free exchange of currencies applies only to non-residents.
3. Non-convertible (closed) currencies - currencies of those countries where there are restrictions on almost all types of transactions.
Also distinguished clearing currencies– currency units of account that exist only in ideal (counting) form in the form of accounting records of banking transactions for the mutual supply of goods and provision of services by the countries participating in the payment agreement. An example is before 2002. Euro, CDP.
In a market economy, the movement of funds from country to country, exchange and sale of currencies is carried out primarily through the activities of large commercial banks. Trade and foreign economic transactions are carried out through such banks. The main economic agents of the foreign exchange market are exporters, importers and holders of asset portfolios.
There are 3 modes for establishing exchange rates in the global monetary system:
1. Based on gold parities (under the gold standard). It was based on the ratio of the gold content of monetary units, i.e. at gold parity. Currencies pegged to gold were related to each other at fixed exchange rates. Moreover, the gold content in currencies did not change until 1914. The deviation of the exchange rate from parity was insignificant within the so-called “golden points”, determined by the costs of transporting gold abroad. The gold standard acted as an automatic regulator of the world market.
2. Fixed rate. The exchange rate of the national currency is set by the Central Bank, which undertakes to buy and sell any amount of foreign currency at the established rate. Typically, the Central Bank sets limits on free fluctuations of the national currency for the purpose of macroeconomic stabilization. When the price of a currency approaches the upper or lower limit of these limits, the Central Bank intervenes: approaching the lower limit requires the Central Bank to purchase this currency in exchange for foreign currency or gold, and vice versa.
3. Floating rate. The exchange rate is established as a result of free fluctuations in supply and demand as the equilibrium price of a currency in the foreign exchange market. With a system of completely flexible exchange rates, fluctuations in the exchange rate are not limited in any way, so fluctuations in the volume of exports and imports, and, consequently, the state of the trade balance, current account and balance of payments as a whole may be difficult to predict, which can have a destabilizing effect on the economy.
Fig. 13.1. National currency rate
Rice. 13.2. Supply and demand of foreign currency
Exchange rate- this is the price of the monetary unit of one country, expressed in the monetary units of another country, in purchase and sale transactions. Such a price can be set based on the relationship between supply and demand for a certain currency in a free market, or it can be strictly regulated by a decision of the government or the central bank.
Most foreign exchange markets use a quotation procedure called fixing – this is the determination of the interbank rate by sequentially comparing supply and demand for each currency. Buyer's rates and seller's rates are then set on this basis.
Fixing the exchange rate of a national currency into a foreign currency is called a foreign exchange quotation. Quotes are divided into 2 types:
straight ($1 = 23 rub.);
reverse (1 ruble = $).
Most countries use direct quotes, the UK uses reverse quotes, and the USA uses both.
Classification of exchange rates:
1. Depending on the parties to the transaction, the buyer's rate and the seller's rate are distinguished. The seller's rate is higher. The difference between these rates is called margin (profit).
2. According to the types of payment documents, a distinction is made between the rate of telegraphic transfer, the rate of checks, and the rate of banknotes.
3. According to the forms of exchange rates, there are:
a) fluctuating - changes freely under the influence of supply and demand and is based on the use of the market mechanism;
b) floating – fluctuates, which is due to the use of the currency regulation mechanism. Thus, in order to limit sharp fluctuations in the exchange rates of national currencies, which cause unpleasant consequences in monetary, financial and economic relations, countries that have entered the European Monetary System have introduced the practice of harmonizing relative mutual fluctuations in exchange rates;
c) fixed - an officially established relationship between national currencies, based on currency parities determined by law. It allows the content of national monetary units to be fixed directly in gold, US dollars, euros, while strictly limiting fluctuations in market exchange rates within specified limits (about 1%).
4. Cross rate is a quotation of 2 foreign currencies, neither of which is the national currency of the party to the transaction. This rate is obtained by calculation. For example, the dollar to yen exchange rate through the ruble.
5. The nominal exchange rate is the relative price of the currencies of 2 countries.
6. The real exchange rate is the relative price of goods produced in 2 countries. It takes into account the ratio of prices within the country and prices on the world market. It tells you the ratio in which the goods of one country can be exchanged for the goods of another.
7. Exchange rate is the price of a unit of foreign currency expressed in units of national currency.
8. The exchange rate is the price of a national currency unit expressed in foreign currency units.
9. Depending on the type of foreign exchange transactions, the following are distinguished:
a) SPOT rate - the rate of cash (cash) transactions in which currency is delivered immediately (within 2 business days). This is the base rate of the foreign exchange market; current trading and non-trading transactions are settled using it.
b) forward rate - the rate of forward transactions in which the delivery of currency is carried out after a certain period of time on a fixed date.
The volume of exports depends largely on the comparative benefits that entrepreneurs can receive from selling goods abroad compared with selling on the domestic market. If we abstract from such exogenous parameters as customs duties, overhead costs, etc., then comparative benefit comes down to one parameter - the real exchange rate. The cheaper the national currency, the more profitable it is to increase export volumes.
Export is a decreasing function of the exchange rate:
E =f (er),
where E – export;
er – real exchange rate.
The relationship between the nominal and real exchange rates is:
er = e * Pf/Pd ,
where e is the nominal exchange rate;
P d – level of domestic prices expressed in national currency;
P f – price level abroad, expressed in foreign currency.
e = er * Pd/Pf .
If prices within a country rise, then the nominal exchange rate also rises, i.e. The national currency becomes cheaper. Thus, the factors that determine the rise in prices in the country also cause an increase in the exchange rate.
Imports in macroeconomic models are considered as expenses for the consumption of imported goods. In the neoclassical concept, imports are viewed as a decreasing function of the interest rate, and in the Keynesian concept, as an increasing function of income.
The relationship between two national currencies, established by law and which is the basis of the exchange rate, is called currency parity.
There is a theory of purchasing power parity (PPP) as the basis for the exchange ratio of 2 currencies, which connects the dynamics of the exchange rate with changes in the price ratio in the respective countries.
Purchasing power parity - the level of exchange rates of currencies that equalizes the purchasing power of each of them. According to this concept, the exchange rate always changes exactly as much as necessary in order to compensate for the difference in the dynamics of price levels in different countries.
In other words, if exchange rates are adjusted relative to purchasing power parity, then the transfer (conversion) of funds from one currency to another should not cause a change in the purchasing power of these funds.
The theory is built on the assumption that international trade smoothes out differences in the price movements of basic goods; such goods should have approximately the same prices in all countries, calculated in the same currency. If the activity of resellers is possible on international markets, then the dollar (ruble, franc) should have the same purchasing power in all countries.
PPP is the result of comparing the amount of goods that can be purchased on the national markets of the countries whose currencies are being compared. Objective comparison can be achieved by using a large number of goods and services included in the conditional consumer basket of 2 countries.
If in Russia such a basket costs 2300 rubles, and in the USA – 100 $, then the price is 1 $ = 2300/100 = 23 rubles. If prices in Russia double, then the dollar-ruble exchange rate will double (46 rubles).
PPP provides a guideline for setting exchange rates. The fact is that the latter can fluctuate under the influence of many reasons, deviating from the PPP.
When the exchange rate of the national currency falls, exporters benefit, and when the exchange rate rises, importers benefit.
Currency restrictions is a system of regulatory rules established administratively or legislatively and aimed at limiting transactions with foreign and national currencies and other currency values.
Currency restrictions include:
1) regulation of international payments and capital transfers, repatriation of profits, movement of gold, banknotes and securities;
3) concentration in the hands of the state of foreign currency and other currency values.
They are discriminatory in nature. Used to equalize the balance of payments; maintaining the exchange rate; concentration of currency values in the hands of the state.
There are the following types of currency restrictions:
Licensing of foreign exchange transactions;
Complete or partial blocking of foreign currency accounts;
Limitation of currency convertibility.
Accordingly, different categories of currency accounts are introduced: freely convertible, internal (in national currency with use within the country), under bilateral government agreements, clearing, blocked, etc.
Currency restrictions are divided into two main areas:
1) current balance of payments transactions (trade and “invisible” transactions);
2) financial (movement of capital and loans, transfer of profits, tax and other payments).
Currency restrictions contribute to the temporary equalization of the balance of payments of individual countries, but ultimately complicate the problem of their balancing, since it becomes necessary to regulate international payments with each country separately. Limiting the convertibility of currencies actually abolishes the most favored nation principle and increases discrimination against trading partners through the use of multiple exchange rates.
The objective need to remove currency barriers in international economic relations gives rise to a tendency towards interstate regulation of currency restrictions. However, this factor is countered by national protectionism as a means of competition directed against trading partners.
The exchange rate depends on many factors, and primarily on the demand and supply of currency in the market, therefore all factors influencing the supply and demand of a currency also affect its exchange rate. Among them are the following:
1. Inflation rate. Inflationary depreciation of money in a country causes a decrease in its purchasing power and a tendency for its exchange rate to fall against the currencies of countries where the inflation rate is lower. This trend is usually observed in the medium and long term. The equalization of the exchange rate, bringing it into line with purchasing power parity, occurs on average within two years. The dependence of the exchange rate on the inflation rate is especially high in countries with a large volume of international exchange of goods, services and capital. This is explained by the fact that the closest relationship between the dynamics of the exchange rate and the relative rate of inflation appears when calculating the exchange rate based on export prices. Therefore, it is necessary to calculate real exchange rates, which depend on the growth rate of national income, the level of production costs, etc.
2. State of the balance of payments. An active balance of payments contributes to the appreciation of the national currency, as the demand for it from foreign debtors increases. The passive balance of payments creates a tendency for the national currency to depreciate, as debtors sell it for foreign currency to pay off their external obligations. Currently, the balance of payments is increasingly influenced by capital movements, which also affects the exchange rate.
3. Differences in interest rates in different countries. The movement of capital largely depends on the difference in interest rates in different countries. An increase in the interest rate stimulates the import of capital into the country, and a decrease in the rate forces them to seek use of free capital abroad, which increases the instability of the balance of payments.
Low interest rates in other countries encourage banks to buy foreign currency from them, increasing its supply. As a result, the exchange rate of the national currency rises. If a given country has higher interest rates than other countries, this may facilitate the influx of foreign capital and increase the demand for the country's currency and its exchange rate.
So, in the first half of the 80s. The policy of high interest rates in the United States stimulated (along with other factors) an influx of investment in the amount of more than $500 billion from Western Europe and Japan. As a result, the dollar exchange rate increased, and the exchange rate of the investing countries' currencies decreased under the influence of this factor.
4. Activities of foreign exchange markets and speculative foreign exchange transactions. If the exchange rate of a currency tends to fall, then firms and banks sell it in advance for more stable currencies, which worsens the position of the weakened currency. Foreign exchange markets quickly respond to changes in the economy and politics, and to fluctuations in exchange rates.
5. The extent to which a particular currency is used in the European market and in international transactions.
6. Expediting or delaying international payments. In anticipation of a depreciation of the national currency, importers try to speed up payments in foreign currency so as not to incur losses when its exchange rate increases. When the national currency strengthens, on the contrary, its desire to delay payments in foreign currency prevails.
7. Degree of confidence in the currency on national and world markets. It is determined by the state of the economy and the political situation in the country, as well as the factors discussed above that affect the exchange rate. Moreover, dealers take into account not only the given rates of economic growth, inflation, the level of purchasing power of the currency, the ratio of supply and demand of the currency, but also the prospects for their dynamics.
8. State monetary policy has a certain impact both on the internal situation of the country and on its position in the world economy.
Government actions affecting the exchange rate are divided into direct and indirect regulation measures.
Direct regulation measures give a quick and noticeable effect:
1. Discount rate policy. By raising the discount rate (interest on loans provided by the Central Bank to commercial banks, or the discount when discounting their bills), the Central Bank directly affects the increase in the currency exchange rate. After all, with a high interest rate, commercial banks take out fewer loans and buy less foreign currency. A decrease in demand for foreign currency leads to an increase in the exchange rate of the national currency. If the discount rate decreases, the exchange rate falls.
2. Currency interventions are targeted operations for the purchase or sale of foreign currency to limit the dynamics of the national currency exchange rate. If the Central Bank buys the currency of its country (sells foreign currency) on the foreign exchange markets, this leads to an increase in its exchange rate (demand increases while supply remains unchanged). And vice versa.
3. Devaluation (decrease in the exchange rate of one’s currency) and revaluation (increase in the exchange rate).
All monetary and financial policy instruments have an indirect impact on the exchange rate. If the Central Bank takes measures aimed at reducing inflation in the economy, this will lead to stabilization of the exchange rate.
When monetary policy is tightened, the growth of the money supply is limited and the supply of the national currency is reduced, which leads to an increase in its exchange rate. Easing monetary policy creates a tendency for the national currency to appreciate.
Tightening tax policy in general, and especially in relation to non-residents, leads to a depreciation of the national currency.
HAPPY BIRTHDAY– international payment and reserve funds issued by the International Monetary Fund (IMF). Used for non-cash international payments between countries - members of the IMF and with the IMF by recording in special accounts, as well as as the IMF unit of account; are an international reserve asset.
Issued means of payment are distributed between countries in amounts proportional to the latter's quota in the IMF.
SDRs perform a number of functions of world money in regulating balances of payments, replenishing official foreign exchange reserves, and measuring the value of national currencies, but do not have their own value and real security.
The term SDR is also used to designate an artificial collective monetary unit, the exchange rate of which until 2000 was was determined on the basis of the weighted average exchange rate of a special set of currencies.
