What is parity in the financial relations of states?

The word "parity" came to Russia from Latin and means "equality." It has many meanings in various areas of human life, but today we will only consider the semantic roles in the financial and economic sphere. In particular, it will be told what parity is, price and currency.

In the first case, it means an equal ratio of the cost of different types of products. Here, the basis is taken by the base, where the prices for the goods are established by the principle of equivalence, which is identical to the rate of profit. At the same time, this indicator will necessarily be preserved if the balance in the dynamics has insignificant deviations or remains unchanged. Observance of such parameters is the main economic condition for balanced and proportional development, ensuring comparability of the degree of efficiency in terms of profitability. In addition, knowing exactly what parity is, all market partners are confident of meeting the conditions for expanded reproduction.

Currency parity is the ratio between two different currencies, which is established strictly by law. Equilibrium is the basis of the entire international exchange rate, deviating from the envisaged balance sheet. Until 1978, it was determined by gold content. After the next meeting of the participants of the specialized currency fund, the so-called drawing rights were announced as the basis of the calculation. This is a special type of equivalent that is issued by the IMF and is used only through central banks of states for intergovernmental payments.

In addition, in 1979, a monetary union of European countries was created, fixing all the obligations of the EEC (economic union of Europe), stipulated by law. It should explain to all new participants what parity of currency transactions is, keep it in strictly established limits, and also not to allow deviations of mutual market rates from agreed boundaries. This applies to virtually all known world currencies. For example, the parity of the ruble against the dollar or the pound against the euro is so guarded.

It is worth noting that the total number of factors that affect the currency parity can reach several tens. All of them are psychological, structural, economic, legal or political. The most important of them are: state regulation, discount rates, the state of the national income and trade balance, the expected inflationary rates, as well as the money supply and its values. In all cases, the GNP (gross national product) of the states participating in international exchange is fundamental.

The question of what the parity of currency transactions is, is still considered quite interesting and open, therefore, despite the fact that the latest changes in this regard were made more than thirty years ago, the balance itself remains to this day. Although the constant threat of a crisis can make the base reconsider in the near future.