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  • The International Monetary System

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    Mohamed Mady
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    The document outlines the history of international monetary systems from 1876 to present day. It describes the gold standard period from 1876-1913, where currencies were fixed to gold. During the interwar years from 1914-1944, currencies fluctuated widely without gold backing. The Bretton Woods agreement from 1945-1971 established a US dollar-based system and created the World Bank and IMF. The IMF provides short-term loans to correct monetary imbalances while the World Bank focuses on long-term development loans. By 1971, most currencies floated freely against the dollar, ending the gold exchange standard.

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    The International Monetary System

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    The document outlines the history of international monetary systems from 1876 to present day. It describes the gold standard period from 1876-1913, where currencies were fixed to gold. During the interwar years from 1914-1944, currencies fluctuated widely without gold backing. The Bretton Woods agreement from 1945-1971 established a US dollar-based system and created the World Bank and IMF. The IMF provides short-term loans to correct monetary imbalances while the World Bank focuses on long-term development loans. By 1971, most currencies floated freely against the dollar, ending the gold exchange standard.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as DOCX, PDF, TXT or read online from Scribd
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    Download as docx, pdf, or txt
    287 views2 pages

    The International Monetary System

    Uploaded by

    Mohamed Mady
    The document outlines the history of international monetary systems from 1876 to present day. It describes the gold standard period from 1876-1913, where currencies were fixed to gold. During the interwar years from 1914-1944, currencies fluctuated widely without gold backing. The Bretton Woods agreement from 1945-1971 established a US dollar-based system and created the World Bank and IMF. The IMF provides short-term loans to correct monetary imbalances while the World Bank focuses on long-term development loans. By 1971, most currencies floated freely against the dollar, ending the gold exchange standard.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as DOCX, PDF, TXT or read online from Scribd
    Flag for inappropriate content
    Download as docx, pdf, or txt
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    The International Monetary System:

    Gold Standard (1876-1913) o Each country set a rate of which its currency could be converted to a weight of gold. o Conclusions of Gold Standard: Value of each currency in terms of gold, and therefore exchange rates between countries was fixed. Maintaining adequate reserves of gold was important!!! This led to an increase in international trade and limits on money supply and inflation happened.

    Interwar Years (1914-1944) o War stopped the movement of gold. o Currencies fluctuated into wide ranges, in terms of gold and each other. Demand and Supply forces determined the exchange rate.

    Bretton Woods Agreement (1945), two major changes o US dollar based international monetary system. o Creation of the World Bank and IMF.

    Gold Exchange Standard: o Under the BW agreement all countries fixed the value of their currencies in terms of gold, they were not required to exchange currency for gold. Only the dollar remained convertible into gold.

    The IMF o Provides conditional short-term loans, to correct monetary imbalances and assistance. o Its financing facility aims to reduce the impact of export instability on county economies. o IMF uses a quota system, and financing is measured in special drawing rights.

    World Bank o Long term loans to help countries enhance their economic development. o Structural Adjustment Loans are intended to enhance a countrys long-term economic growth. o Funds are provided spread through co-financing agreements with official aid agencies, export credit agencies, and commercial banks.

    The End of the Gold exchange standard: o Ended in August 1971. o Exchange Rates of most trading countries were allowed to float in relation to the dollar.

    Exchange rate regime classification: o Floating exchange regime: The exchange rate is market determined. o Managed floating with no preannounced path: The monetary authority intervenes with no recommitment to a preannounced path. o Exchange rate within crawling pegs o Crawling pegs o Currency board o Fixed exchange rate o Currency Union

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