2. METHODS OF EXCHANGE
CONTROL
Exchange control:
One of the important device to control
international trade and payments.
Haberler:
Exchange control as state regulation excluding
the free play of economic forces from the Foreign
Exchange market.
3. Features:
• It involves complete Government Control
over Foreign Exchange market.
•All foreign currencies are required to be
surrender to the central bank
•Central bank fixes the official Exchange
Rate.
• Only specified bank and licensed dealers
can deal in foreign Exchange
7. Direct method
Intervention
Government Intervention in foreign exchange market.
Pegging up and pegging down
Pegging up it means demand for its currency at the higher
exchange rate is less than the supply.
Exchange Restriction
Allocation According to priorities
Allow essential goods and restriction on luxury goods
Multiple Exchange Rate:
Different exchange rate and different import
Reducing the imports and increases the exports
8. Exchange Clearing Agreement
Payment Agreement
Repayment of debt of one country to another country
Quantitative restriction
Restriction in quantity and impose the quotas on imported goods
Export Bounties:
Encourage the domestic industries and raising the external value of the
country
Limited amount
Government ----- domestic industries
9. Raising interest rate
change in the interest rate with in Country influence its ForeignEx rate
Attracts capital funds from the other country
Prevent the outflows raise external value.
