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1998 – 2012 Global Forex LLC All Rights Reserved. In economics, a local currency is a currency that can be spent in a particular geographical locality at participating organisations. A regional currency is a form of local currency encompassing a larger geographical area. Complementary currency – is used as a complement to a national currency, as a medium of exchange, which is usually not legal tender. Community currency – a complementary currency used by a group with a common bond, such as residents of a locality, association, or members of a business or online community. Local currency – a complementary currency used in a locality.
Regional currency – a local currency where the locality is a larger region. Auxiliary currency, microcurrency, Eco-Money – less common synonyms for community or local currency. Private currency – a currency issued by an individual, business or non-governmental organization. Complementary currencies are a type of private currency. Sectoral currency – a complementary currency used within one economic sector, such as education or health care.
The Wörgl experiment illustrates some of the common characteristics and major benefits of local currencies. Local currencies with negative interest rate or demurrage tend to circulate much more rapidly than national currencies. The same amount of currency in circulation is employed more times and results in far greater overall economic activity. It produces greater benefit per unit. Local currencies enable the community to more fully utilize its existing productive resources, especially unemployed labor, which has a catalytic effect on the rest of the local economy.
They are based on the premise that the community is not fully utilizing its productive capacities, because of a lack of local purchasing power. The alternative currency is utilized to increase demand, resulting in a greater exploitation of productive resources. Since local currencies are only accepted within the community, their usage encourages the purchase of locally produced and locally-available goods and services. Thus, for any level of economic activity, more of the benefit accrues to the local community and less drains out to other parts of the country or the world.