Governmental Restrictions on ForeignExchange Convertibility

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• Governmental Restrictions on Foreign-Exchange
  Convertibility
• Restrictions used to conserve scarce foreign
  exchange
• Licensinggovernment regulates all
  foreign-exchange transactions
• those who receive foreign currency required to
  sell it to its central bank at the official
  buying rate
• central bank rations foreign currency
• Multiple exchange-rate systemdifferent exchange
  rates set for different transactions
• Advance import depositrequires importers to make
  a deposit with central bank covering price of
  goods they would purchase from abroad
• Quantity controlslimit the amount of currency
  that resident can purchase for foreign travel
• Currency controls increase the cost of
  international business and reduce overall
  international trade