Volatility refers to the unpredictable change in price of a commodity. That is, the rate at which the price of a commodity increases or decreases.
Money refers to anything or item that generally serve as a medium for exchange. It is officially used for the purchase and selling of goods and commodity.
The volatility of money refers to the unsteady change of currencies. It is the unpredictable increase or decrease if currencies in the world global exchange. A very good example is the steady increment in the value of united state currency which is Dollar to the value of Nigeria currency, Naira.
As it keeps increasing, the economy of united state keep increasing while that of Nigeria keep decreasing because most importations in Nigeria are exchanged in dollars and the volatility in their currencies makes Nigeria pay more money for the goods.Volatility of money is caused by different things and can also be regularize. When there is volatility of money, it is of an advantage to some countries while the other countries bears the consequences in one way or the other.
Inflation rate is a major cause of volatility of money. As the price of goods or commodity decreases, the value of the currency tends to rise while as the price of goods or commodity increases, the value of currency tends to fall. Inflation is common among the undeveloped and developing countries most especially Africa ciuntries which seriously affect their currencies by depressiating and devaluing it compared to other countries.
Scarcity also causes volatility of money in the sense that if money is scarce in a country and its very hard to get, the currency tends to increase in value while if there is surplus production of money in a country and it is very easy to get, such country currency tends to depreciate in value. Though it is not applicable to all countries because some advance countries knows how to regularize their currencies.
For instance, Nigeria despite the scarcity and hardship of money, their currency Naira doesn't have value and keep depreciating every day because they don't know how to balance their economy with their currency.
Loan interest rate also causes volatility of money. Interest rate makes country generate more revenue and thereby increase their currency rate as borrowers pay at an higher rate. The opposite of that happened to the lender's country. Since they pay at an higher rate, it make a loss for their country and tends to depreciate the value of their currency.
Demand and supply also causes volatility of money. If a demand for a currency is too high and people uses it a lot, the value of the currency tends to increase steadily as the country knows people have no choice and they have to meet the demand of people.
As the demand increases, the supply also increases for advanced country like united state. United State currency, Dollar is one of the most popular currency in the world because it is used in almost all countries. Almost all cryprocurrencies accepts only dollar in exchange for their coin.
Also the online shopping sites also uses dollar as a means of exchange when it comes to international trading. It doesn't stop there, some countries also exchange their currency for dollar and keep it because of the steady increment in the value of their currency. all this are the things that triggers their currency for the regular appreciation.
But for developing countries like Nigeria, as the demand increases, the supply decreases because they have limited production of their currency and the more they spend, the less they produce.
All demands and supplies should be met. All countries should try as much as possible to balance their demands and supply. If all demands are being supplied, there won't be volatility of money in such country and it will be minimal if at all it should occur. Countries with low production should try all means if reducing their demands for other currencies and the demands coming in from other countries for their currencies.
Countries should try as much as possible to avoid international loans. Debts caused by loans as we know is a major factor of volatility of money. Countries that are hoping to take loan due to the problems and challenges they are facing should try as much as possible to make plans before requesting for the loan.
They should decide on the total amount they need, the money they have in ground and the actual amount they are planning to borrow, they should set a plan for refund, the mode of refund and the estimated time to refund the loan completely. All this should be consider well before requesting for an international loan in order to avoid volatility of money because any slight mistake or change of plan might have changes on their currency.
Production should also be balanced in order to regulate volatility of money. There shouldn't be scarcity of money likewise surplus of money the two tends to affect the currency of money if not well balanced. It is never possible to balance the scarcity of money and surplus of money equally but the range should not be too much and too obvious. If this is considered, the volatility of money will definitely regulate.
Inflation rate should be regulate or minimize in a country in order to regulate the volatility of money in such country.
The price of goods should be kept constant regularly. If there is any means for change in the price, it should increase or decrease in such a way that the new price will not inflate the money of such country. For example, if a pair of shoe cost about 10 US dollars in the united state if there will be increase or decrease in the price of the shoe, it should be minimal like 0.5 to 1 dollar increment or decrement.
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