Clearing Agreement (Unilateral Methods)

Clearing agreement may be defined as an undertaking between two or more nations to buy and sell goods and services among themselves according to specified rate of exchange. The payments are to be made by buyers in the buyer's home currency. The balance, if any, is settled among the central banks of the nations at the end of stipulated periods either by exporging gold or of an acceptable third currency, or they are allowed to accumulate for another period in which the creditor country works off the balance by additional purchases from the debtor country. The main objectives for entering into clearing agreement are to liquidate the blocked accounts, to ensure quilibrium in the balance of payments and to check the fluctuating exchange rates.