The methods of exchange control may be classified broadly into two groups: 1. Direct Methods 2. Indirect Methods. 1. Direct Methods: The direct methods of exchange control are adopted by the central bank with the object of restricting the use and the quantity of foreign exchange. These include intervention, exchange restriction, exchange clearing agreements and payments agreements. They are briefly [...]
For the determination of the par values of different currencies, alternative theoretical explanations have been given. Some of the prominent explanations or theories include: 1. Mint Parity Theory 2. The Purchasing Power Parity Theory 3. The Balance of Payments Theory 4. The Monetary Approach to Foreign Exchange 5. Portfolio Balance Approach. 1. The Mint Parity Theory: The earliest theory of [...]
In this article we will discuss about:- 1. Introduction to Optimum Currency Areas 2. Benefits of Optimum Currency Areas 3. Disadvantages. Introduction to Optimum Currency Areas: The optimum currency area theory is a relatively recent area of study. The pioneering work in this field was done by J.E. Meade and T. Scitovsky in 1957-58. The main credit for developing this [...]