Convertibility

Convertibility, in economics, financial arrangement under which currencies of different countries can be exchanged for each other. Under complete convertibility, all currencies can be exchanged for all others. Under partial convertibility, only certain currencies can be exchanged for certain others. The rate of exchange can be either fixed or floating (changing from day to day). After World War II, the lack of foreign exchange caused many European countries to restrict convertibility, but at the present time all major currencies are freely convertible with each other.