International Monetary System Flashcards
The International Monetary
a set of rules, procedures, instruments and institutions necessary to make international payments
Functions of the Ministry of Internal Affairs
1) Facilitating international economic cooperation
2) Facilitation of international trade and settlements
3) Facilitating the movement of goods and services
International money
1) Value gauge function
2) Means of payment function
3) Accumulation function
4) Major international currencies – USD, EUR, JPY
5) Reference function – USD 69 countries, EUR 40 countries
Criteria for recognition as international money
1) Large share of exports
2) Widespread confidence in the currency
3) Well-developed financial market of the currency issuer
International liquidity
1) Asset resource for international settlements
2) Ensuring an adequate level of reserves
3) Reserves – assets used to restore external balance, usually reserves are held in gold, SDR (special drawing rights) or foreign currencies
Convertibility of currencies
the possibility of exchanging one currency for another guaranteed by law
Gold currency system
1) 1870 – 1914
2) Objective – maintaining external balance
3) The exchange rate is determined and fixed by the gold parity ratio of the two currencies
4) The amount of money in circulation is closely related to the size of gold reserves
5) BP’s deficit -> the flow of gold reserves -> a decrease in the amount of money in circulation -> a decrease in domestic prices -> an increase in exports, a decrease in imports -> the restoration of BP’s equilibrium
Foreign exchange and gold system
1) 1918-1939
2) Money not convertible into gold
3) Gold used to balance international trade
4) The foreign exchange and gold system buried the crisis of the 30s
System z Bretton Woods
1) 1944 – 1971
2) Fixed exchange rates against USD
3) Constant gold price in USD
4) Reserves – gold and USD
Collapse of the Bretton Woods system
1) The problem of the external balance of the US
2) The need to maintain large gold reserves
3) Ekspansja fiskalna USA -> inflacja -> pogorszenie terms of trade
4) Speculation on the fall in the value of the USD against gold
5) The emergence of a two-tier gold market
6) 1970 -> recession in the US -> the need to devalue the USD
Evaluation of the Bretton Woods system
1) Stabilization for 20 years
2) Provision of national money
3) High exchange rate stability
4) Too low international liquidity
After Bretton Woods
1) Fluent Courses – Kingston 1976
2) Increasing international liquidity
3) Foundations of the modern Ministry of Internal Affairs
