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Convertibility ( convertibility ; Latin convertere "to reverse", "to turn around"; English convertibility ) is in foreign trade the free and unlimited exchangeability of the domestic currency for other foreign currencies .


Internationally, free markets require full convertibility of legal tender . Ultimately, convertibility describes the legal possibility of exchanging means of payment for other means of payment and ultimately for goods and services . That is why a free foreign exchange and capital market has the highest convertibility. Foreign exchange and capital controls, as opposed to convertibility, exist in states that have imbalances in their balance of payments . Often there is a “convertibility of the current items”, ie payments in connection with trade and services, income from work and property from abroad and free transfers. Conversely, capital convertibility, which enables the free movement of capital, is not associated with this.

Export , import , merchanting , tourism and international credit transactions can only function if economic entities are also allowed to acquire, hold, transfer and repay their claims and liabilities in foreign currency .


There is full and limited convertibility .

  • Complete convertibility exists if domestic and foreign natural and legal persons are allowed to carry out ongoing payments and capital transactions in foreign currencies without limitation. Every holder of domestic currency and currency has the right to exchange them for foreign or domestic currency without restriction at the parity rate (Article VIII Section 4 in conjunction with Article IV of the IMF Agreement).
  • Limited convertibility
    • In relation to person or institution : the right to exchange domestic for foreign currency can be restricted to foreigners or foreign central banks or to domestic and domestic central banks:
      • Resident convertibility means that only the resident of foreign exchange may exchange his means of payment for foreign currency without restrictions, while the foreigner is subject to quantitative and other restrictions in the context of foreign exchange control.
      • The foreigners convertibility granted only to non-residents , the conversion into other currencies , while the residents under the exchange control quantitative and subject to other restrictions.
    • In relation to the intended use : the convertibility only applies to current transactions (trade in goods and services) and debt servicing ; Capital transactions, on the other hand, are restricted or prohibited.
    • In relation to currencies : only certain foreign currencies can be exchanged for domestic currency.

As part of its currency constitution , a state can decide autonomously whether its own currency should be freely exchangeable or whether the exchangeability is restricted and controlled by the state (foreign exchange management). A fully convertible currency is when the exchangeability of one currency for another is unrestricted; Residents and foreigners are allowed to purchase, hold and sell any amount. Non-convertible currencies are called domestic currency and are only valid in the country that issues them.

Depending on the type of transactions , a distinction can be made between current account convertibility (or more limited: trade account convertibility) and capital account convertibility . A current account convertibility exists if transactions are permitted within the framework of the current account , for example the payment of ongoing transactions like an import of goods. In contrast, capital transactions (such as the purchase of securities ) are restricted or prohibited. This is covered by Article VIII Section 4 of the IMF Agreement, which only requires convertibility for current transactions. The IMF statutes only provide for foreigner convertibility and current account convertibility. The convertibility of capital movements in turn allows the free import and export of capital , which enables the free movement of capital for investments in Germany and abroad.


In its original meaning was understood convertibility guarantee a central bank that issued from her notes at a fixed price in gold to exchange ( gold convertibility ). The United Kingdom began this gold convertibility in September 1717 when it set gold parity at 3.17.10 ½ pounds sterling (3.89 pounds decimal) per troy ounce of gold. This enabled international capital movements within a global currency system.

In 1923 John Maynard Keynes attacked convertibility in the context of the discussion about a return to the gold standard as a worn-out dogma, because it could not guarantee the stability of the economic system because of its automatism . After the UK faced a drastic outflow of its gold reserves , the country was forced to suspend the convertibility of the pound in September 1931. In contrast to the Reichsmark , the pound remained freely tradable, albeit at a fluctuating exchange rate . This collapsed by 30% and also forced the trading partners to share the price. In the devaluation race, world trade collapsed completely in 1932.

The Bretton Woods Agreement on July 22, 1944, restricted this comprehensive definition and limited convertibility to acquired bank balances and current business (Article VI, paragraph 3 and Article VIII, paragraph 4). The IMF agreement made convertibility the basis of the international monetary system. But even after the planned transition period had expired, most of the signatory countries were unable to convert to convertibility. England introduced it in July 1947, but gave it up after six weeks in August 1947 and returned to foreign exchange management .

A special form of convertibility existed from April 1, 1954 through the Beko mark . On the basis of the notification from the Bank deutscher Länder , non-residents were allowed to open “limited convertible DM accounts” that were non-interest-bearing and could be used for payments in third countries. Foreign exchange residents were allowed to make deposits into this account . From July 1, 1958, the Beko accounts were run as freely convertible DM accounts. Between July 1, 1950 and December 1958, there was the European Payments Union (EPU), the aim of which was to achieve convertibility through a credit mechanism and multilateral clearing .

On December 29, 1958, the 14 EPU members, Great Britain and Northern Ireland , Denmark , Norway and Sweden introduced convertibility to foreigners on the basis of the IMF statutes , followed by Austria in January 1959 . Only then was the IMF agreement able to develop its real effect. The first step on the way to converting the ruble was the agreement of the Comecon states at their conference in Budapest in November / December 1965 to pay 10% of the capital of the International Bank for Economic Cooperation in gold or freely convertible currencies. Since the ruble, as a collectivist currency, necessarily remained a pure domestic currency and the subject of arbitrary interference by the planning authorities, there was no prerequisite for its convertibility. With full convertibility, the planning authorities would no longer be able to determine to what extent their imports would be paid for by exports and to what extent they would be paid for in gold or Western currencies. There was therefore only internal convertibility within the Comecon. Legally, all currencies of the Comecon member states (including the GDR mark ) have remained purely domestic currencies without any convertibility. The Russian ruble has only been formally fully convertible since July 2006 and was accepted as the clearing currency by Clearstream and Euroclear in January 2007 . The Chinese renminbi has had limited current account convertibility since April 1994, while capital movements are not yet convertible due to very restrictive approval procedures. Contrary to the designation peso convertible (CUC), the second currency - which existed alongside the US dollar - was introduced in Cuba in December 1994 and is not freely convertible. In October 2013, the Cuban government published a declaration in which it announced the merger of the two parallel Cuban currencies, without, however, giving any specific information on the timing of the necessary measures.

Economic importance

Convertibility facilitates world trade . Complete convertibility leads to positive effects in foreign trade, with unlimited exports and imports and helping to increase the international division of labor . This leads to relative comparative cost advantages , because every country can specialize in cross-border exchange processes in the export of those goods that it can produce with the smallest absolute cost disadvantage (= relative comparative cost advantage), which helps improve the welfare of its trading partners. Sales markets expand and the supply of raw materials can be improved. Finally, by increasing international competition , price stability can also be achieved. Convertible currencies tend to be used for international financial transactions in capital transactions and are gaining in prestige as a result.

However, convertibility can also contribute to imbalances in the trade balance if import-heavy states often have to devalue their currencies due to permanent trade deficits and vice versa. This jeopardizes the external balance , which can lead to the (temporary) suspension of convertibility. Capital movements convertibility also enables international speculation (against a currency or a state) and can therefore trigger or exacerbate financial crises . The main reason for the restriction of the convertibility of capital movements is the introduction of capital movement controls , which can also prevent capital flight . A return to full convertibility is only possible when the disturbances in the external balance caused by the goods economy subside, so that full convertibility can only be achieved through limited convertibility.

Individual evidence

  1. Compact Lexicon Economic Policy , Springer Fachmedien, 2013, p. 234.
  2. ^ Articles of Agreement of the International Monetary Fund of April 28, 2008.
  3. Business entity with residence or habitual abode in Germany
  4. Markus Krajewski, Wirtschaftsvölkerrecht , 2012, p. 227.
  5. Sumati Varma, International Business , 2012, o. P.
  6. ^ John Maynard Keynes, A Tract on Monetary Reform , 1923, 138
  7. Monika Dickhaus, The Bundesbank in West European Reconstruction , 1996, p. 29.
  8. Dieter Krüger, Security through Integration? , 2003, p. 20.
  9. Monika Dickhaus, The Bundesbank in West European Reconstruction , 1996, p. 30.
  10. BdL No. 7031/54 of March 22, 1954 and No. 7043/54 of April 29, 1954
  11. Klaus-Heinrich Standke, The trade with the east: The economic relations with the state trading countries , 1972, p. 85.
  12. a b Miklós Vásárhelyi, The Development of Soviet Foreign Trade with the European Eastern Bloc countries since the founding of COMECON , 1967, p. 78.
  13. Elmar E. Schmitz, Banking Reform and Monetary Policy Control in the People's Republic of China , 2004, p. 26
  14. Monika Dickhaus, The Bundesbank in West European Reconstruction , 1996, p. 35.
  15. Monika Dickhaus, The Bundesbank in West European Reconstruction , 1996, p. 36.
  16. Albrecht Forstmann, The Basics of Foreign Trade Theory , 1956, p. 356.