How countries with multiple currencies manage them?

Question

certain countries have more than one approved currency system. Isnt that a little more headache for the finance ministry?

Answer 1

The above answer is good, just to add:

Technically, the euro is the only officially accepted currency. In fact, there are no nations with more than one officially-approved currency. For those in which two currencies operate side-by-side, this is generally due to either a very weak official currency (which casts employers and business-owners to rely upon the unofficial currency), or a substantial underground economy.

Some currencies may peg their values to another, either directly (such as Argentina, which pegs the peso to the US dollar) or through a basket of currencies (such as China's renminbi which is pegged to a basket consisting of the dollar, euro, yen, won, etc). But this does not mean that the pegged currency is an official currency; it may be honored as such by businesses, but rarely do you find examples of taxes being paid in the foreign reserve.

I take that back - there are situations of salutary neglect, such as in the British Colonial period in North America, when foreign tender was seen as desireable for the exchange of British goods, since British merchants knew that Francs and Dinars would be honored in Europe before Colonial dollars would be.

But even in this instance, the finance ministry does not manage the foreign currency. It may estimate its stock and flow, an even attempt to estimate the unofficial exchange rate, but it will not manage these currencies.

Answer 2

Countries With Two Currencies

Answer 3

Yes, it is. Generally, these countries are more subject to counterfeiting and fraud. The US in the 1800's had many different currencies, and it lead to many problems. Most economies like this generally begin to favor one currency over the other, and the second currency is gradually phased out. For instance, the euro is slowly gaining popularity in some European nations, and as a result, the native currencies are becoming less popular. I would imagine several of them will be eliminated in the next several years.

Answer 4

The real (brazilian money) was made in 1994 so everything from 1994 on is totally valid in Brazil. Before that there was no real.