Evolution of International Monetary System - 3692 Words

The Evolution of the International Monetary System In response to the worst financial crisis since the 1930s, policy-makers around the globe are providing unprecedented stimulus to support economic recovery and are pursuing a radical set of reforms to build a more resilient financial system. However, even this heavy agenda may not ensure strong, sustainable, and balanced growth over the medium term. We must also consider whether to reform the basic framework that underpins global commerce: the international monetary system. My purpose this evening is to help focus the current debate. While there were many causes of the crisis, its intensity and scope reflected unprecedented disequilibria. Large and unsustainable current account†¦show more content†¦This is because the only limit on reserve accumulation is its ultimate impact on domestic prices. Depending on the openness of the financial system and the degree of sterilization, this can be delayed for a very long time.2 In contrast, deficit countries must either deflate or run down reserves. Flexible exchange rates prevent many of these problems by providing less costly and more symmetric adjustment. Relative wages and prices can adjust quickly to shocks through nominal exchange rate movements in order to restore external balance. When the exchange rate floats and there is a liquid foreign exchange market, reserve holdings are seldom required.3 Most fundamentally, floating exchange rates overcome the seemingly innate tendency of countries to delay adjustment. A brief review of how the different international monetary regimes failed to manage this trade-off between nominal stability and timely adjustment provides important insights for current challenges. The Evolution of the International Monetary System The Gold Standard Under the classical gold standard, from 1870 to 1914, the international monetary system was largely decentralized and market-based. There was minimal institutional support, apart from the joint commitment of the major economies to maintain the gold price of their currencies. Although the adjustment to external imbalances should, in theory, have been relatively smooth, in practice it was not problem-free.4 Surplus countriesShow MoreRelatedThe Stystem Developed in the The Bretton Woods Conference862 Words   |  3 Pagesrepresentatives of two nations influenced the planning of the world monetary system (Scammell, 1982). The Article of Agreement was a negotiation between Britain and The United States, which was accepted and signed by 44 other nations (Ikenberry, 1933). The conference saw the establishment of the two most significant financial institutions, The International Bank for Reconstruction and Development [World Bank] and The International Monetary Fund (Stwenron, 1944). The conference set the standard of goldRead MoreThe Economic Policy Of General And The Monetary Policy1590 Words   |  7 PagesAssignment – Week 1 It is clear that the economic policy in general and the monetary policy in particular should be concerned with the overall economic well-being. In this paper we propose to discuss this core topic. We will provide an overall picture of the functioning mechanism. In this regard, the discussion will develop around the governmental policies and of FED, and their scope on the free market. The argumentation will refer to the notion of common good and will try to establish if the measuresRead MoreCentral Bank1254 Words   |  6 PagesMoscow International Higher Business School â€Å"MIRBIS† (Institute) Foreign Language Department Abstract Of the Diploma Paper â€Å"The Central Banking† Student: Fomi Language Consultant: Irina A. Zhavoronkova Moscow 2011 Subject Matter of the Study The subject of the paper is the review of basic terms of Central Bank, it’s monetary policyRead MoreImf And Negative Impacts On Argentina1082 Words   |  5 PagesThe IMF and Negative Impacts on Argentina The International Monetary Fund is an organization created in 1945 consisting of 187 member-countries with goals to foster a global cooperative monetary system, promote international trade growth and exchange rate stability, and maintain a multilateral system of payments. 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Social aspects and their key-indicators like population growth rate, infant mortality rate, unemployment ratio, life expectancy, composition of the population (age, sexRead MoreUS Power reflected on the global political economy Essay1167 Words   |  5 Pagespolitical economy during the Bretton Woods period, it is important to highlight the key aspects of the Bretton Woods system itself, and how it came to be. After the Second World War, American and British postwar planners began to realize the need for a stable international monetary system for international economic activity and peace (O’Brien Williams, 2013). These planners desired a system that would provide stability in exchange rates, but would also allow adjustments. Considering the fact that theRead MoreBanking On Legitimacy : Ecb And The Eurozone Crisis Essay913 Words   |  4 Pagesb. Banking on Legitimacy: The ECB and the Eurozone Crisis This section contains a summary of the article, Banking on Legitimacy: The ECB and the Eurozone Crisis by Kathleen McNamara, in the Georgetown Journal of International Affairs, published in Summer/Fall 2012, Volume 13, No. 2, pages 143 – 150. The main thesis, methodology of the report, results/findings and the final conclusion and recommendations of the articles will be addressed below. 1. Thesis Over the last few years, the EU has beenRead MoreMicrofinance Is A Complex Important Issue For Both The Average Person, And The Financial Sector1390 Words   |  6 Pagessavings accounts, checking accounts and other basic financial services. Microfinance is commonly done through a variety of Microfinance Institutions also known as MFIs. These institutions commonly offer a variety of services in addition to just monetary contributions. Depending on the country some microfinance institutions offer coaching, financial literacy courses and direct or indirect education about business or other topics. Some topics discussed in the paper include; the history of microfinance