Could anybody tell me, what is the point in setting fixed ratio of two currencies (for example, Lithuanian government set the fixed ratio of Euro and Litas (local currency of Lithuania) in 2002 - 1:3.4528) ?
And additional question would be - could I basically say, that setting a fixed ratio of two currencies is nearly the same thing as introducing one currency (in this instance, Litas would be changed with Euro rather than setting a fixed ratio), because aspects affecting one currency's value are going to be identically replicated in the other currency's value because the ratio is the same no matter what occurs.
I have doubts, whether it is the right place to ask such a questions in consideration of the fact that I am not asking about studying. However, there are lots of knowledgeable members of this forum, and I believe you will be able to help me.
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Cause of fixed currency ratio watch
- Thread Starter
- 06-04-2006 18:47
- 07-04-2006 00:43
Point of setting an initial ratio is to test whether or not a single currency union/entry is viable.
Allows you to monitor the current account balance between the two before going 'all in'.