Currency Exchange Rate
Currency exchange rate - this is the value of one country's currency expressed in another country's currency unit at the time of buying and selling.
For example, by selling 1 US dollar today, you will get 2.63 GEL. Yesterday, the rate of lari was less than the dollar, tomorrow it will be a different rate. Everything depends on supply and demand. On the other hand, the National Bank has a special role and responsibility for the strength and reliability of the currency.
The national currency in Georgia has been the GEL since 1995. Apart from some exceptions, GEL is the only legal means of payment. Conditionally, a tourist coming from America will have to use Georgian lari to buy any item or product.
What is currency in general? A monetary unit used in a particular country is currency is called. It is a medium of exchange, which is usually given in the form of money and coins. When you buy bread or butter at the store with paper money or a credit card, you are using currency. There are more than 170 currencies in the world and they are issued by governments or central banks.
Until the beginning of the 20th century, the world lived in a multi-currency regime. Gold, copper and silver were used instead of money. Even today, there are several countries (China, Cuba, Ecuador) where there is still a multi-currency regime. In China, Renminbi is used locally, while Yuan is used for international transactions.
Fixed or Floating Exchange Rate
A floating exchange rate applies in Georgia. During this regime, the exchange rate is formed on the basis of market supply and demand and macroeconomic factors. Currencies are bought and sold in the foreign exchange market, and whichever currency has more demand, it gets stronger. Under such conditions, free capital mobility and inflation targeting are easier.
With a fixed exchange rate, the local currency is pegged to one or more currencies of another country. Earlier, currency was converted into gold at a predetermined parity and a fixed exchange rate was maintained on the gold standard. It should be noted that until 1997, the Georgian lari was pegged to the US dollar, because there was more confidence and a feeling of stability towards the newly created lari.