Problem

Dual exchange rate systems

Other Names:
Dual currency systems
Incidence:

Countries in which there is also a black market exchange rate can be considered to offer a second exchange rate system. Dual systems are especially common in low-income African countries. They effectively tax exports. Only following the conclusion of the GATT Uruguay Round did China agree to terminate its own dual currency system. The official exchange rate for the yuan in 1993 was approximately 5.8 to the dollar, but only about 20% of hard currency transactions were conducted at that rate. The remainder occurred on currency exchange markets at a rate of about 8.7 to the dollar (or on the black market which effectively offered a third exchange rate). Foreign investors may be penalized by such two-tier systems because of the requirement that they convert their share of capital at the less advantageous rate.

Strategies:
Unifying currencies
Related UN Sustainable Development Goals:
GOAL 17: Partnerships to achieve the Goal
Problem Type:
E: Emanations of other problems
Date of last update
18.09.2019 – 15:15 CEST