INTB 1203 Chapter Notes - Chapter 11: International Monetary Systems, Floating Exchange Rate, International Monetary Fund
13 Dec 2016
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Document Summary
International monetary system- institutional arrangements countries adopt to govern exchange rate. Floating exchange rate- a system under which the exchange rate for converting one currency into another is continuously adjusted depending on the laws of supply and demand. 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. Gold standard- the practice of pegging currencies to gold and guaranteeing convertibility. Gold par value- the amount of currency needed to purchase one ounce of gold. Strength of gold standard- it contained a powerful mechanism for achieving balance-of-trade equilibrium by all countries. Balance of trade equilibrium- (cid:396)ea(cid:272)hed (cid:449)he(cid:374) the i(cid:374)(cid:272)o(cid:373)e a (cid:374)atio(cid:374)"s (cid:396)eside(cid:374)ts ea(cid:396)(cid:374) from exports equals money paid for imports. Downside- no institutions can stop countries from engaging in competitive devaluations. Called for a system of fixed exchange rates that would be policed by the imf.
