See
also: List of Economic Topics 
CURRENCY
- macroeconomics
A
currency is a unit of exchange, facilitating the transfer of goods and services.
It is a form of money, where money is defined as a medium
of exchange rather than e.g. a store of value. A currency zone is a country or
region in which a specific currency is the dominant medium of exchange. To facilitate
trade between currency zones, there are exchange rates i.e. prices at which currencies
(and the goods and services of individual currency zones) can be exchanged against
each other. Modern currencies can be classified as either floating currencies
or fixed currencies based on their exchange rate regime.
In
most cases, each country "has" monopoly control over its own currency. Member
countries of the European Monetary Union are a notable exception to this rule,
as they have ceded control of monetary policy to the European Central Bank.
In
cases where a country does have control of its own currency, that control is exercised
either by a Central Bank or by a Ministry of Finance. In either case, the institution
that has control of monetary policy is referred to as the monetary authority.
Monetary authorities have varying degrees of autonomy from the governments that
create them. In the United States, the Federal Reserve operates with full indepenedence
from the government. It is important to note that a monetary authority is created
and supported by its sponsoring government, so independence can be reduced or
revoked by legislative fiat. In almost all Western countries, the monetary authority
is largely independent from the government.
Several
countries can use the same name, each for their own currency (e.g. Canadian dollars
and US dollars), several countries can use the same currency (e.g. the euro),
or a country can declare the currency of another country to be legal tender (e.g.
Panama and El Salvador have declared US currency to be legal tender).
Each
currency typically has one fractional currency, often valued at 1/100 of the main
currency: 100 cents = 1 dollar, 100 centimes = 1 franc, 100 at (currency) = 1
kip (currency). Units of 1/10 or 1/1000 are also common, but some currencies do
not have any smaller units. Mauritania and Madagascar are the only remaining countries
that do not use the decimal system; instead, the Mauritanian ouguiya is divided
into 5 khoum, while the Malegasy ariary is divided into 5 iraimbilanja. However,
due to inflation, both fractional units have in practice fallen into disuse.
History
Early
Currency
Currency
is the creation of a circulating medium of exchange based on a store of value.
Currency evolved from two basic innovations: the use of counters to assure that
shipments arrived with the same goods that were shipped, and the use of silver
ingots to represent stored value in the form of grain. Both of these developments
had occurred by 2000 BC.
This
first stage of currency, where metals were used to represent stored value, and
symbols to represent commodities, formed the basis of trade in the Fertile Crescent
for over 1500 years. However, the collapse of the Near Eastern trading system
pointed to a flaw: in an era where there was no place that was safe to store value,
the value of a circulating medium could only be as sound as the forces that defended
that store. Trade could only reach as far as the credibility of that military.
Coinage
These
factors led to the shift of the store of value being the metal itself: at first
silver, then both silver and gold. Metals were mined, weighed, and stamped into
coins. This was to assure the individual taking the coin that he was getting a
certain known weight of precious metal. Coins could be counterfeited, but they
also created a new unit of account, which helped lead to banking. It was with
Archimedes' principle that the next link in currency occurred: coins could now
be easily tested for their fine weight of metal, and thus the value of a coin
could be determined, even if it had been shaved, debased or otherwise tampered
with. (See Coinage).
In
most major economies using coinage, copper, silver and gold formed three tiers
of coins. Gold coins were used for large purchases, payment of the military and
backing of state activities. Silver coins were used for large, but common, transactions,
and as a unit of account for taxes, dues, contracts and fealty, while copper coins
represented the coinage of common transaction. In Europe this system worked through
the medieval period because there was virtually no new gold, silver or copper
introduced through mining or conquest. Thus the overall ratios of the three coinages
remained roughly equivalent.
In
China, however, the need for credit and for circulating medium led to the introduction
of paper money.
The
Era of Hard and Credit Money
Paper
money was, in one sense, a return to the oldest form of currency: it represented
a store of value backed by the credibility of the issuing authority. Drafts and
checks issued privately had been in intermittant use for centuries, however, it
was with the rise of global trade that paper money would find a permanent place
in currency.
The
advantages of paper currency were numerous: it reduced transport of gold and silver,
and thus lowered the risks; it made loaning gold or silver at interest easier,
since the specie never left the possession of the lender until someone else redeemed
the note; and it allowed for a division of currency into credit and specie backed
forms. It enabled the sale of stock in joint stock companies, and the redemption
of those shares in paper.
However,
these advantages held within them disadvantages. First, since a note has no intrinsic
value, there was nothing to stop issuing authorities from printing more of it
than they had specie to back it with. Second, because it created money that did
not exist, it was subject to Gresham's Law: people would exchange money rather
than coins of the same value, and this increased the velocity of money and therefore
increased inflationary pressures, a fact observed by David Hume in the 18th century.
The result is that paper money would often lead to an inflationary bubble, which
would then collapse when the demand for paper notes fell to zero, and people began
demanding hard money. The printing of paper money was also associated with wars,
and financing of wars, and therefore regarded as part of maintaining a standing
army.
For
these reasons, paper currency was held in suspicion and hostility in Europe and
America. It was also addictive, since the speculative profits of trade and capital
creation were quite large. Major nations established mints to print money and
mint coins, and branches of their treasury to collect taxes and hold gold and
silver stock.
Legal
Tender Era
With
the creation of central banks, currency entered into a new era in the history
of currency. During both the coinage and credit money eras the number of entities
which had the ability to coin or print money was quite large. One could, literally,
have "a license to print money"; many nobles had the right of coinage.
Royal colonial companies, such as the Massachusetts Bay Company or the British
East India Company could issue notes of credit—money backed by the promise
to pay later, or exchangeable for payments owed to the company itself. This led
to continual instability of the value of money. The exposure of coins to debasement
and shaving, however, presented the same problem in another form: with each pair
of hands a coin passed through, its value grew less.
The
solution which evolved beginning in the late 18th century and through the 19th
century was the creation of a central monetary authority which had a virtual monopoly
on issuing currency, and whose notes had to be accepted for "all debts public
and private". The creation of a truly national currency, backed by the government's
store of precious metals, and enforced by their military and governmental control
over an area was, in its time, extremely controversial. Advocates of the old system
of Free Banking repealed central banking laws, or slowed down the adoption of
restrictions on local currency. (See Gold standard for a fuller discussion of
the creation of a standard gold based currency).
At
this time both silver and gold were considered legal tender, and accepted by governments
for taxes. However, the instability in the ratio between the two grew over the
course of the 19th century, with the increase both in supply of these metals,
particularly silver, and of trade. This is called bimetallism and the attempt
to create a bimetallic standard where both gold and silver backed currency remained
in circulation occupied the efforts of inflationists. Governments at this point
could use currency as an instrument of policy, printing paper currency such as
the United States Greenback, to pay for military expenditures. They could also
set the terms at which they would redeem notes for specie, by limiting the amount
of purchase, or the minimum amount that could be redeemed.
By
1900, most of the industrializing nations were on some form of gold standard,
with paper notes and silver coins constituting the circulating medium. Governments
too followed Gresham's Law: keeping gold and silver paid, but paying out in notes.
Modern
currencies
To
find out which currency is used in a particular country, start at the countries
of the world or look at the table of historical exchange rates.
Nowadays
ISO have introduced a system, ISO 4217, using three-letter codes to define currency
(as opposed to simple names or currency signs), in order to remove the confusion
that there are dozens of currencies called the dollar and many called the franc.
Even the pound is used in nearly a dozen different countries, all, of course,
with wildly differing values. In general, the three-letter code uses the ISO 3166-1
country code for the first two letters and the first letter of the name of the
currency (D for dollar, for instance) as the third letter.
The
International Monetary Fund uses a variant system when referring to national currencies.
Currency
names
Currency
names of the world in alphabetic order by currency name:
Afghani
- Afghanistan
Ariary - Madagascar
Baht - Thailand
Balboa - Panama
(U.S. dollar used for paper money)
Birr - Ethiopia
Bolívar - Venezuela
Boliviano - Bolivia
Cedi - Ghana
Colón
Costa Rican colón
- Costa Rica
El Salvador colón - El Salvador
Dalasi - The Gambia
Denar - Macedonia
Dinar
Algerian dinar - Algeria
Bahraini dinar
- Bahrain
Iraqi dinar - Iraq
Jordanian dinar - Jordan
Kuwaiti dinar
- Kuwait
Libyan dinar - Libya
Tunisian dinar - Tunisia
Serbian dinar
- Serbia
Sudanese dinar - Sudan
Iranian rial - The dinar is a subdivision
of the Iranian Rial
Dirham - Morocco, United Arab Emirates (UAE)
Dollar
Australian dollar - Australia; also in Christmas Island, Cocos (Keeling) Islands,
Heard Island and McDonald Islands, Norfolk Island, Kiribati, Nauru and Tuvalu
Barbados dollar - Barbados
Bahamian dollar - Bahama
Belize dollar
- Belize
Bermuda dollar - Bermuda
Brunei dollar - Brunei
Canadian
dollar - Canada
Cayman Islands dollar - Cayman Islands
East Caribbean
dollar - Anguilla, Antigua and Barbuda, Dominica, Grenada, Mont Serrat, St Kitts
and Nevis, St Lucia and St Vincent and the Grenadines
Fijian dollar - Fiji
Guyanese dollar - Guyana
Hong Kong dollar - Hong Kong
International
dollar - hypothetical currency pegged 1:1 to the United States dollar
Jamaican
dollar - Jamaica
Liberian dollar - Liberia
Namibian dollar - Nambia
New
Zealand dollar - New Zealand
Singapore dollar - Singapore
Solomon Islands
dollar - Solomon Islands
Suriname dollar - Suriname
New Taiwan dollar
- Taiwan
Trinidad and Tobago dollar - Trinidad and Tobago
Tuvaluan dollar
- Tuvalu
United States dollar - United States of America; also used in several
other countries, including Ecuador and Panama, as well as many former UN Trust
Territories
Zimbabwe dollar - Zimbabwe
Dong - Vietnam
Drachma - (Greece
now uses euro)
Dram - Armenia
Escudo - Cape Verde, (Portugal now uses
euro)
Euro
European Union (as an organisation; the euro is not legal tender
in every EU country.)
EU members: Austria, Belgium, Finland, France (except
pacific territories using CFP franc), Germany, Greece, Ireland, Italy, Luxembourg,
Netherlands, Portugal, Spain.
Countries that have made legal agreements with
the EU to use the euro: Monaco, San Marino, Vatican City.
Territories that
unilaterally use the euro: Andorra, Montenegro and Kosovo.
Currencies pegged
to the euro: Cape Verdian escudo,CFA franc, CFP franc, Comoran francs, Bulgarian
lev, Estonian kroon, Lithuanian litas, the convertible marka of Bosnia and Herzegovina
Forint - Hungary
Franc
Swiss franc - Switzerland, Liechtenstein.
CFA
franc - Benin, Burkina Faso, Cameroon, Central African Republic, Chad, Côte
d'Ivoire, Republic of the Congo, Equatorial Guinea, Gabon, Guinea-Bissau, Mali,
Niger, Senegal, Togo
CFP franc - France's Pacific territories of New Caledonia,
French Polynesia, and Wallis and Futuna.
Comoran franc - Comoros (pegged to
the French franc, then the euro).
Congolese franc - Democratic Republic of
Congo (suppressed in 1967 by Mobutu, re-established in 1998 by Laurent Kabila)
Burundi franc - Burundi
Rwandan franc - Rwanda
Djiboutian franc -
Djibouti (pegged to the US dollar since 1973)
Guinean franc - Guinea (suppressed
in 1972 by dictator Sékou Touré, re-established in 1986 by his successor
Lansana Conté)
Malagasy franc - Madagascar (the Malagasy franc is scheduled
to disappear by the end of 2004, replaced by the more national sounding Ariary;
this controversial decision was taken by the new president of Madagascar Marc
Ravalomanana)
Formerly using French franc: Andorra, Monaco (the French mint
was also minting some Monaco Franc coins with the head of the prince of Monaco
on them; no Monaco franc banknotes), France (including French Guiana, Guadeloupe,
Martinique, Réunion, Saint-Pierre and Miquelon and Mayotte).
Formerly
using Belgian franc: Belgium, Luxembourg.
Formerly using Luxembourg franc:
Luxembourg (1 Luxembourg franc was equal to 1 Belgian franc; Belgian francs were
legal tender inside Luxembourg, but Luxembourg francs were not legal tender in
Belgium).
Gourde - Haiti
Guaraní - Paraguay
Guilder - Aruba,
Netherlands Antilles (Netherlands now uses euro)
Hryvnia - Ukraine
Kina
- Papua New Guinea
Kip - Laos
Koruna - Czech Republic, Slovakia
Kroon
- Estonia
Króna - Iceland
Krona - Sweden
Krone - Denmark, Faroe
Islands, Greenland, Norway
Danish krone - Denmark, Faroe Islands, Greenland
Norwegian krone - Norway
Kuna - Croatia
Kwacha
Malawian kwacha
- Malawi
Zambian kwacha - Zambia
Kwanza - Angola
Kyat - Myanmar
Lat
- Latvia
Lari - Georgia
Lek - Albania
Lempira - Honduras
Leu
Romanian
Leu - Romania
Moldovan Leu - Moldova
Lev - Bulgaria
Lilangeni - Swaziland
Lira
Italian lira (obsolete, replaced by Euro) - Italy
San Marino
lira (obsolete, replaced by Euro) - San Marino
Vatican City lira (obsolete,
replaced by Euro) - Vatican City
Cyprus lira - Cyprus (more often referred
to as Cyprus pound)
Maltese lira - Malta
Turkish lira (replaced by the
New Turkish lira) - Turkey
Litas - Lithuania
Loti - Lesotho
Manat
Azerbaijani Manat - Azerbaijan
Turkmen Manat - Turkmenistan
Mark -
(Germany now uses euro)
Marka - Bosnia and Herzegovina
Markka - (Finland
now uses euro)
Metical - Mozambique
Nafka - Eritrea
Naira - Nigeria
Ngultrum - Bhutan
Ouguiya - Mauritania
Pataca - Macau
Peseta -
(Andorra, Spain now use euro)
Peso
Argentine peso - Argentina
Chilean
peso - Chile
Colombian peso - Colombia
Cuban peso - Cuba
Dominican
peso - Dominican Republic
Mexican peso - Mexico
Philippine peso - Philippines
Uruguayan peso - Uruguay
Pound - Cyprus, Malta, Egypt, Falkland Islands,
Gibraltar, Guernsey, Jersey, Saint Helena, United Kingdom (Ireland now uses euro)
Cyprus pound - Cyprus
Egyptian pound - Egypt
Falkland Islands pound
- Falkland Islands
Gibraltar pound
Saint Helena pound - Saint Helena
Irish
pound (obsolete, replaced by Euro) - Ireland
Israeli pound - obsolete. Used
in Israel until 1980.
Lebanese pound - Lebanon
Pound sterling - United
Kingdom
Syrian pound - Syria
Pula - Botswana
Quetzal - Guatemala
Rand
- South Africa
Real - Brazil
Renminbi - People's Republic of China
Rial
Iranian rial - Iran
Omani rial - Oman
Yemeni rial - Yemen
Riel
- Cambodia
Ringgit - Malaysia
Riyal
Qatari riyal - Qatar
Saudi
riyal - Saudi Arabia
Ruble
Belarusian ruble - Belarus
Russian ruble
- Russia
Rufiyah - Maldives
Rupee
Indian rupee - India
Mauritian
rupee - Mauritius
Nepalese Rupee - Nepal
Pakistani Rupee - Pakistan
Seychelles
rupee - Seychelles
Sri Lankan Rupee - Sri Lanka
Rupiah - Indonesia
Schilling
- (Austria now uses euro)
Shekel
New Israeli sheqel - Israel, Gaza Strip,
West Bank
Shilling
Kenyan shilling - Kenya
Somali shilling - Somalia
Tanzanian shilling - Tanzania
Ugandan shilling - Uganda
Sol - Peru
Som - Kyrgyzstan, Uzbekistan
Kyrgyzstani som - Kyrgyzstan
Uzbekistani
som - Uzbekistan
Sucre - Ecuador
Taka - Bangladesh
Tenge - Kazakhstan
Tugrik - Mongolia
Tolar - Slovenia
Vatu - Vanuatu
Won - North
Korea, South Korea
Yen - Japan
Yuan - People's Republic of China
Zaire
- Zaire
Zloty - Poland
Privately-issued
currencies
Several
large companies issue points to their customers, to be redeemed for products and
services produced by that company. Often, a network of companies will join to
share in the offering and redemption of points. While these can hardly be considered
stable currency systems, they present many of the same features as "legitimate"
currency: they are a store of value, issued in discrete units; they are controlled
by a central issuing authority; and they have varying rates of exchange with other
forms of currency. For example, frequent flyer miles can be bought using U.S.
dollars.
Economics,
Banking & Finance
