Chapter 11. The International Monetary System: Past, Present, and Future. Learning Objectives. Identify the key characteristics of an effective monetary system. Describe the historical evolution of the international monetary system from Bretton Woods to the present time.
The International Monetary System: Past, Present, and Future
Identify the key characteristics of an effective monetary system.
Describe the historical evolution of the international monetary system from Bretton Woods to the present time.
Explain the purpose of the IMF and understand its strengths and weaknesses.
Differentiate among existing alternative monetary arrangements.
Compare and contrast several proposals for reform of the current international monetary system.
To seek stability in exchange rates
Reconciliation of country adjustments to payments imbalances with national autonomy in macroeconomic policy
To help preserve relatively free trade and payments in the world economy
As of 1978, IMF member countries have the right to have whatever exchange rate systems they wish.
A number of distinct exchange rate arrangements now exist, ranging from no flexibility to total flexibility.
Sometimes this non-uniform collection of arrangements is called a “non-system.”
The international monetary system for industrialized countries can be characterized as a managed float.
What is the consensus about the operation of that system?
6. There has not been an increase in inflation because of greater flexibility of exchange rates (the “vicious circle” hypothesis of Chapter 28 hasn’t come to pass).
7. More flexible exchange rates do not seem to have caused the volume of trade to shrink.
speculative overinvestment greater flexibility of exchange rates (the “vicious circle” hypothesis of Chapter 28 hasn’t come to pass).
inadequate institutional development and oversight
ease of capital flight from one country to another8.The Asian financial crisis of 1997 was fueled by
The world’s worst recession since WWII began in 2007 with the onset of the collapse of the U.S. subprime market.
The downturn quickly spread to other countries.
In response, governments have used expansionary fiscal and monetary policy; IMF has attempted to help developing countries.
Greater stability and coordination of Macroeconomic Policies Across Countries
Macro policies for a particular country can be unstable over time, and countries’ macro policies are sometimes at cross-purposes.
It might therefore be sensible to make a greater effort to coordinate policies.Suggestions for Reform of the International Monetary System
Such coordination might be difficult to operationalize. Across Countries
Thank You ! Countries
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