Recent developments in two different parts of the world bring to light the dynamics of the foreign exchange market. The Wall Street Journal reports that Myanmar recently decided to allow its currency (Kyat) to float and raised the question how successful such a move would be without a sophisticated financial infrastructure.
The Economist recently reported the success of a currency issued by a central bank that does not exist. Even though there is dollarisation in Somalia the old currency, the Schilling is still playing the role of money in that economy without the presence of a stable government or a central bank. Some of the reasons for the success are its fixed supply, its role as a "store of value" and being supported by the strong social relationships in Somalia.
The Economist recently reported the success of a currency issued by a central bank that does not exist. Even though there is dollarisation in Somalia the old currency, the Schilling is still playing the role of money in that economy without the presence of a stable government or a central bank. Some of the reasons for the success are its fixed supply, its role as a "store of value" and being supported by the strong social relationships in Somalia.
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