MGMT 3225 Lecture 11: Chapter 11 International Monetary System
Document Summary
International monetary system: institutional arrangements that govern the exchange rates. Pegged exchange rate: currency value is fixed relative to a reference currency. Fixed exchange rate: a system under which the exchange rate for converting one currency into another is fixed. European monetary system (ems): eu system designed to create a zone of monetary stability in europe, control inflation, and coordinate exchange rate policies of eu countries. Gold standard: pegging currencies to gold and guaranteeing convertibility. Gold par value: the amount of currency needed to purchase one ounce of gold. Balance of trade equilibrium: the income its residents earn from exports is equal to the money its residents pay to other countries for imports. If a currency became too weak to defend, a devaluation of up to 10 percent would be allowed without any formal approval by the imf. Flexibility: two major features of the imf articles of agreement fostered this flexibility: imf lending facilities and adjustable parities.
