Limited Convertibility

AAA

DEFINITION of 'Limited Convertibility'

A situation in which government regulations prevent the free conversion of the home currency into a foreign one. Because the government is only able to regulate currency transactions within its borders, foreigners are still able to trade the currency. Only residents are unable to convert a currency with limited convertibility.

INVESTOPEDIA EXPLAINS 'Limited Convertibility'

Limited convertibility can have a cooling effect on trade as well as foreign direct investment. However, countries that are in the process of moving to a more open economy may need to open up currency restrictions in steps rather than all at once. This has been the case in the development of countries that once had centrally planned economies, as opening up domestic markets would subject the home market to foreign competition.

RELATED TERMS
  1. Exchange Rate

    The price of a nation’s currency in terms of another currency. ...
  2. Dual Currency Service

    A forex trading service that allows an investor to speculate ...
  3. Central Bank

    The entity responsible for overseeing the monetary system for ...
  4. Currency

    A generally accepted form of money, including coins and paper ...
  5. Forex - FX

    The market in which currencies are traded. The forex market is ...
  6. Monetary Policy

    The actions of a central bank, currency board or other regulatory ...
Related Articles
  1. How Influential Economists Changed Our ...
    Fundamental Analysis

    How Influential Economists Changed Our ...

  2. Currency Exchange: Floating Rate Vs. ...
    Forex Education

    Currency Exchange: Floating Rate Vs. ...

  3. What Is International Trade?
    Personal Finance

    What Is International Trade?

  4. The Currency Board: Understanding The ...
    Personal Finance

    The Currency Board: Understanding The ...

comments powered by Disqus
Hot Definitions
  1. Correlation

    In the world of finance, a statistical measure of how two securities move in relation to each other. Correlations are used ...
  2. Letter Of Credit

    A letter from a bank guaranteeing that a buyer's payment to a seller will be received on time and for the correct amount. ...
  3. Due Diligence - DD

    1. An investigation or audit of a potential investment. Due diligence serves to confirm all material facts in regards to ...
  4. Certificate Of Deposit - CD

    A savings certificate entitling the bearer to receive interest. A CD bears a maturity date, a specified fixed interest rate ...
  5. Days Sales Of Inventory - DSI

    A financial measure of a company's performance that gives investors an idea of how long it takes a company to turn its inventory ...
  6. Accounts Payable - AP

    An accounting entry that represents an entity's obligation to pay off a short-term debt to its creditors. The accounts payable ...
Trading Center