2024 Author: Howard Calhoun | [email protected]. Last modified: 2023-12-17 10:16
The word "parity" came to Russia from the Latin language and means "equality". It has many meanings in various areas of human life, but today we will consider only semantic roles in the financial and economic sphere. In particular, it will be told what price and currency parity is.
In the first case, it means an equal ratio of the cost of different types of products. Here, the base is taken as the basis, where the prices for goods are set according to the principle of equivalence, which is identical to the rate of return. At the same time, this indicator will be necessarily maintained if the balance in dynamics has insignificant deviations or remains unchanged. Compliance with such parameters is the main economic condition for a balanced and proportionate development, ensuring the comparability of the degree of efficiency in terms of profitability. In addition, knowing exactly what parity is, all market partners are confident that the conditions for expanded reproduction will be met.
Currency parity is the ratio between two different currencies, which is set strictly inlegislative order. Equilibrium is the basis of the entire international exchange rate deviating from the foreseen balance. Until 1978, it was determined by the gold content. After the next meeting of the participants of the specialized monetary fund took place, the so-called drawing rights were declared the basis of calculation. This is a special type of equivalent that is issued by the IMF and is used only through the central banks of states for intergovernmental payments.
In addition, in 1979 a monetary union of European countries was created, fixing all the obligations of the EEC (Economic Union of Europe) provided for by law. He must explain to all new participants what the parity of foreign exchange transactions is, keep it within strictly established limits, and also prevent deviations of mutual market rates from the agreed boundaries. This applies to almost all known world currencies. For example, this is how the parity of the ruble against the dollar or the pound against the euro is preserved.
It is worth noting that the total number of factors that affect the currency parity can reach several tens. All of them are psychological, structural, economic, legal or political. The most important of them: state regulation, discount rates, the state of national income and trade balance, expected inflation rates, as well as the money supply and its values. At the same time, in all cases, the GNP (gross national product) of the participating states is fundamental.in an international exchange.
The question of what is the parity of currency transactions is still considered quite interesting and open, therefore, despite the fact that the last changes in this regard were made more than thirty years ago, the balance itself is still preserved. Although the constant threat of a crisis may force a revision of the base in the near future.
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