Blocked Exchange

Blocked Exchange

Summary of Blocked Exchange

An exchange restriction, imposed by governmental authority, that forbids the unlicensed purchase of bills of exchange, currency, or negotiable instruments denominated in a foreign currency. The object of this measure is to prevent transmission of foreign currency reserves out of the country. The blocking mechanism impedes trade inasmuch as local merchants are unable to secure the foreign funds necessary to pay for imports. In some cases, import obligations are satisfied by depositing local currency in a domestic bank for the account of the foreign seller, who must then await relaxation of the exchange restriction, or use the funds locally, perhaps to purchase local goods for export.

(Main Author: William J. Miller)

Blocked Exchange and the GATT Policy Negotiations

In relation to the GATT Policy Negotiations, Christopher Mark (1993) provided the following explanation and/or definition of Blocked Exchange: A restriction forbidding the unlicensed purchase of bills of exchange, currency, or negotiable instruments denominated in a foreign currency, in order to prevent depletion of foreign currency reserves. See exchange controls.

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