Explain Why Governments Impose Currency Restrictions and Describe How Companies

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The Answer is Specific examples of countries to illustrate your answers can be drawn from the textbook,class discussions,Internet,and/or newspapers and other publications.
Certain government policies are frequently used to restrict currency convertibility.Governments can require that all foreign exchange transactions be performed at or approved by the country's central bank.They can also require import licenses for some or all import transactions.These licenses help the government control the amount of foreign currency leaving the country.Some governments implement systems of multiple exchange rates,specifying a higher exchange rate on the importation of certain goods or on imports from certain countries.The government can thus reduce importation while ensuring that important goods still enter the country.It also can use such a policy to target the goods of countries with which it is running a trade deficit.
Other governments issue import deposit requirements that require businesses to deposit certain percentages of their foreign exchange funds in special accounts before being granted import licenses.In addition,quantity restrictions limit the amount of foreign currency that residents can take out of the home country when traveling to other countries as tourists,students,or medical patients.
Finally,one way to get around national restrictions on currency convertibility is countertrade-the practice of selling goods or services that are paid for,in whole or in part,with other goods or services.One simple form of countertrade is a barter transaction,in which goods are exchanged for others of equal value.Parties exchange goods and then sell them in world markets for hard currency.

Explain Why Governments Impose Currency Restrictions and Describe How Companies

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