Conversion box

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In the conversion board, the exchange regime is based on a legislative commitment by which the national currency must be exchanged for a specific foreign currency at a specific exchange rate. For this purpose, the authorities broadcasters accept certain restrictions that allow them to comply with their legal obligation. This implies that only foreign-currency-backed domestic currency will be issued and that it will be fully backed by external assets, eliminating traditional central bank functions such as monetary control and lender-of-last-resort, leaving little room for maneuver to apply discretionary monetary policy. Similarly, you can have a certain degree of maneuver according to the rigidity of the set of rules that govern the conversion box.

In short, the country maintains its own currency, but it backs it entirely with the currency of another country to give credibility to its monetary policy.

  • Wd Data: Q5739446

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