The DMs

The currency is stable because of externally imposed constraints and an artificial manipulation of the money supply. Moreover, a strong currency makes goods produced in Macedonia relatively expensive in foreign export markets. Therefore, it is difficult for producers and manufacturers of Macedonia to export. When they sell their products in Germany, which receive frames for them and when these revenues are converted into dinars – Receiving less than they should have if the Denar reflected the true relative strengths of the two economies: the German and the Macedonian one. They pay expenses (eg salaries to their workers, rent, utilities) in dinars. These expenses grow all the time as true inflation grows (as opposed to the official rate of inflation which is suspiciously low) – but they still receive the same amount of dinars to its products and the products when they convert the DMs which has for them.

On the other hand, imports to Macedonia become relatively cheaper: it takes less dinars to buy goods in DM in Germany, for example. So the end result is a growing preference for imports and a decline in exports. In the long run, this increases unemployment. The export is the major driving force in creating jobs in modern economies. In its absence, economies stagnate and decline and people lose their jobs work. But a realistic exchange rate has at least two additional adverse effects: One – as a rule, various sectors of the economy to borrow money to survive and expand. If they expect the local currency is devalued – shall refrain from taking long term credits denominated in hard currencies.

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