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Kostrytsia Mariia Vitalievna



the paper identifies the reasons for the ambiguity of the term "currency" and the main components of the national monetary system. As long as national money remains within the country in which it is in circulation, it remains the national currency   

Ключові слова:
exchange rate, macroeconomics, national economy, development   

УДК 330.131

Kostrytsia Mariia Vitalievna

student of the Faculty of Management and Marketing

National Technical University of Ukraine

Igor Sikorsky Kyiv Polytechnic Institute

(Kyiv, Ukraine)




Abstract: the paper identifies the reasons for the ambiguity of the term "currency" and the main components of the national monetary system. As long as national money remains within the country in which it is in circulation, it remains the national currency.


Keywords: exchange rate, macroeconomics, national economy, development.


One of the most dynamic forms of international economic relations is international monetary relations, which arise when money is used in world economic relations and is a special kind of economic relations. In the vast majority of cases, the mutual exchange of business results and related international settlements is carried out in cash. Therefore, the currency of the country is opposed to the currency of other countries. When, due to various circumstances, they go beyond national borders, they acquire a new quality - they become a currency [1].

The use of currency in various fields is the reason for the ambiguity of the term "currency", which means:

- currency of the country;

- banknotes of foreign countries;

- international currency units.

International settlement or exchange transactions involve mandatory comparison of prices (values) of national and foreign currencies, because for each attractive or sold product is the price expressed in money. This leads to the emergence of the exchange rate and the need to determine its level. The exchange rate is necessary for the mutual exchange of currencies in trade in goods and services, as well as in accounting for the mutual movement of capital and credit. In particular, the exporter exchanges the earned foreign currency for national, as the currencies of other countries cannot be used as legal tender and means of purchase in the country. In turn, the importer exchanges national currency for foreign in order to pay for goods purchased abroad. The debtor buys foreign currency for the national one to repay the debt and pay interest on the foreign loan. The exchange rate is needed to compare the prices of world and national markets, as well as the value of different countries, expressed in different currencies. With the help of the exchange rate there is a periodic revaluation of foreign currency accounts of firms and banks [2].

In fact, the exchange rate is the comparative price of the currency of one country, expressed in units of currency of another country. Like any market price, the exchange rate is formed under the influence of supply and demand [3].

Fixed exchange rates are rates established by treaty or agreement between countries and supported by government regulations. Fixed exchange rates are divided into actually fixed (typical of the gold standard) and contractually fixed (until 1971-1973. Used in the IMF system) [4].

Floating exchange rates are rates that are formed under the influence of supply and demand of currencies and adjusted by the state. There are also the nominal exchange rate shows the exchange rate currently in force in the foreign exchange market and the real exchange rate, which is defined as the ratio of prices of goods of the two countries, taken in the respective currency on a particular date [5].

International economic transactions involve the exchange of national currencies for currencies of other countries. This exchange takes place according to a certain ratio, taking into account the exchange rate. This value category is special because the exchange rate reflects the interaction of national and world economies. If the main characteristics of each currency are formed within the national economy, then their quantitative measurement occurs in the course of international economic transactions. In the implementation of international economic relations there is a comparison of two types of prices - domestic and world. If the former are formed on the basis of different national values of goods, the latter - on the basis of international value. The goods of individual countries, entering foreign trade, seem to drop national prices and are sold in most cases at world market prices .In contrast to national markets, where money serves as a direct measure of commodity values, in international exchange, the ratio of prices prevailing in different countries acts as the ratio of national currencies. Thus, the exchange rate serves indirectly as a measure of the national value of goods through a comparison of national currencies, their relative purchasing power. With the expansion and deepening of the processes of internationalization of the economy, the comparison of national values is becoming more widespread. In the exchange rate are expressed such economic categories as price, productivity, wages, production costs, economic growth. The increase in the role of the exchange rate, caused primarily by the growing interdependence of the economies of individual countries, at the same time associated with a change in the nature of money circulation [6].

Currency basket - a specific set of currencies against which the weighted average exchange rate of one currency is calculated. Due to the fact that the basket includes, as a rule, the currency at mixed dynamic exchange rates, their overall exchange rate changes less sharply than the rate of individual currencies. Thus, the amplitude of fluctuations in the basket of currencies is smaller than the fluctuations of other currencies. In this regard, the basket of currencies is used: a) to establish the exchange rate of some national currencies to foreign currencies (including the ruble exchange rate); b) as a multi-currency item in foreign trade contracts and loans on international capital markets; c) when creating international (regional) collective monetary units. The composition of the currencies included in the basket is determined depending on its scope (trade, investment, credit operations; all major international financial markets or a particular region). The share of a particular currency in the currency basket is usually determined based on the share of the country in total gross national product or foreign trade turnover of a particular group of countries [7].

The main components of the national monetary system are its element, such as the national currency and the degree of its convertibility, exchange rate regime, the state of foreign exchange liquidity, the use of residents (a certain status in tax law, as well as in some other areas of law) [2].Balance of payments - cash flow in the form of payments from country to country. The balance of payments describes the ratio of the amounts of payments made by a country abroad for a certain period and received in the country for the same period. The balance of payments, in which cash inflows exceed their expenditures, is called active, the balance of payments, in which expenditures exceed their income, called passive. Part of the balance of payments is the current account balance (including the trade balance, which includes the balance of exports and imports of goods, the balance of invisible current operations, including net exports of services, investment income, remittances) and the balance of capital transfers (reflecting capital outflows and inflows). The balance of payments is an important indicator and tool for predicting the degree of possible participation of countries in world trade, international economic relations to establish its solvency. The peculiarity of this concept is that the original and modern definitions of this term have fundamental differences that are often misleading. The term "balance of payments" was first used by James Denham Stewart in his "Study of the Principles of Political Economy" (1767). Stewart defines the balance of payments as a self-concept, consisting of: the costs of citizens abroad, debt payments, principal and interest paid to foreigners [8].

Convertibility - the ability of a currency to freely exchange for the currency of other countries or internationally recognized means of payment; in world practice there are full and partial, external and internal convertibility of currencies. Full currency convertibility - means the free exchange of national to foreign currency for all categories of owners and in all transactions without any restrictions; under the regime of full convertibility, all residents and non-residents who own a certain amount of money of the country, have the opportunity to freely conduct foreign exchange transactions on all balance of payments items [9].

The use of foreign currency in international settlements also requires a solution to the question of their quantitative ratio, which is used in the calculation of the exchange rate. The process of demonetization of gold, which deprived the yellow metal of the status of a monetary commodity, led to the loss of a clear guideline, which was the gold parity of currencies. At the same time, the market mechanism of automatic stabilization of the exchange rate, the mechanism of "golden points" was destroyed. The exchange rate under gold monetarism was based on gold parity - the ratio of currencies to their official gold content - and fluctuated spontaneously around it within the gold dots [10].

Constant changes in the commodity structure of domestic markets and prices lead to the need for private recalculation of the PPP. In this regard, to analyze the situation in the foreign exchange market often use the indicator of relative purchasing power parity. The practice of multiple exchange rates is one of the manifestations of the system of currency control, the philosophy of which is inherited from the socialist economy with its focus on top management, calculation of real prices, cabinet method of setting priorities and an extensive system of various privileges. Traditionally, in order to change the movement of foreign currency in the direction necessary to achieve balance of payments, such measures are taken as manipulation of interest rates by the central bank, appropriate customs and tax policies, changes in exchange rates.




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Наукові досягнення молодих вчених. Київ, Україна.   

Посилання для цитування:

Kostrytsia Mariia Vitalievna. THE CONCEPT OF EXCHANGE RATE, ITS TYPES & MEANINGS // ''Наукові досягнення молодих вчених'' (міжнародна наукова конференція). ISBN 978-966-8419-85-6. Київ, Україна. С. 34 - 39. 2022 р. // Електронний ресурс: (дата звернення: 13.07.2024 р.)

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