Capital Account Convertibility Meaning

Capital account convertibility in simple words refers to freeing of domestic economy to world markets. It is the key policy relating to foreign exchange market, when it is implemented it allows people to buy and sell assets freely in international markets. So for example in country ‘A’ which has capital account convertibility then citizens of that country can freely invest and buy or sell assets of other countries provided those countries have also capital account convertibility.

Similarly foreign participants can also buy and sell freely the assets and also invest into country ‘A’ without any restriction. Many developed countries have put into place this system because it helps domestic companies in tapping attractive foreign markets and assets.

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  • K R Natarajan

    Can you kindly explain this in more detail with a few examples. How does it benefit the country and the individual / companies?

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