Finance, Currency
The main elements of monetary systems: types of currencies and their rates
The monetary system of any country is a historically formed and legal form of monetary circulation used in the sovereign territory of a given country. Types of monetary systems are allocated on the basis of the type of money, which is a measure of value. On the basis of this criterion, there are credit, paper-money and metal systems.
- Types of currencies;
- Their form;
- exchange rate.
The concept of "currency" in itself is not unique and has three main meanings. First, it is the national monetary unit of a particular country. Secondly, these are the units of account and the funds of foreign countries. Thirdly, we must not forget about international accounting units like the euro. In the most general form, the following types of currencies are distinguished:
- SCR (freely convertible currency), which is characterized by complete external and internal convertibility, as defined in the legislation of the country for which it is national. For example, the American dollar, the British pound sterling, the Swiss franc.
- PCI (partially-convertible currency), which can be exchanged outside the country with certain restrictions.
- NKV (non-convertible). If other types of currencies can function outside the state in which they are issued, then the IRB is exchanged for foreign currency only in the national market.
Types of exchange rates exert a great influence on international trade . The state determines the most favorable course for its foreign and domestic policy, establishing its regime: a fixed, floating or "currency corridor." The easiest for regulation and control, of course, is a fixed rate. Such a monetary unit is not subject to inflation, but on the other hand, it does not react to changes in the market situation. The floating exchange rate, on the other hand, is determined entirely on the basis of supply and demand, and the state can influence it only through foreign exchange interventions. "Currency Corridor" is the golden mean between the above-mentioned currency regimes, combining their main advantages and disadvantages. However, different types of currencies need a different approach in setting their course, otherwise foreign economic relations of the country may suffer, and, of course, the well-being of its population.
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