Capital account convertibility is a feature of a nation's financial regime that centers on the ability to conduct transactions of local financial assets into foreign financial assets freely or at market determined exchange rates.[1] It is sometimes referred to as capital asset liberation or CAC.
In layman's terms, full capital account convertibility allows local currency to be exchanged for foreign currency without any restriction on the amount.[citation needed] This is so local merchants can easily conduct transnational business without needing foreign currency exchanges to handle small transactions.[citation needed] CAC is mostly a guideline to changes of ownership in foreign or domestic financial assets and liabilities. Tangentially, it covers and extends the framework of the creation and liquidation of claims on, or by the rest of the world, on local asset and currency markets.[2]
^FAQ: Capital a/c convertibility and how it affects you
^Benu Schneider. Issues in Capital Account Convertibility in Developing Countries. Speech delivered to Overseas Development Institute, 2000.
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