International Monetary System

This research presents a review of the development and description of the current international monetary system (IMS). Reviewed also is the current status of the IMS, trends in the IMS, and predictions for the future of the IMS.

Development and Description of the IMS

The main elements of the international monetary system are the currency exchange rate mechanism and the function of reserve currency preferences. Of the two, the currency exchange rate mechanism is somewhat more important (Leckow, 1999).

The industrial countries have employed two general types of international monetary rate change systems since the end of the Second World War · fixed-rate systems and flexible-rate systems. A fixed-rate exchange system is one in which different countries have agreed upon the rates at which their various currencies will be exchanged in international trading, or one in which one country has a fixed-exchange rate for its own currency which it is prepared to defend. Each of these situations existed among the western industrial countries before the introduction of the flexible-rate exchange system, also referred to as a floating-exchange rate system (Little & Olivei, 1999).

A floating-exchange rate system permits each currency to find its own level of exchange, which will change from time-to-time, as economic conditions change. It is important to note, however, that most countries, in some s

. . .
ther characteristic of a hard currency. Currency convertibility means that a currency is exchangeable for either for another currency or for gold in the international currency exchange markets (Leckow, 1999). Current Status of the IMS An important change in the international monetary system occurred in 1999. The European Community (EC) introduced the euro (¦) into the international monetary system on 1 January 1999. Key elements of the international monetary system are the currency exchange rate mechanism and the reserve currency preferences. The euro holds the potential to have a major impact on the international monetary system, especially if the currency ultimately is able to challenge the reserve currency status of the United States (US) dollar ($). The challenge of the euro thus far is weak (La Cour & Macdonald, 2000). During the first month (January 1999) in the life of the euro, the new currency performed well against the US dollar in international currency markets; thereby adding strength to the contention that the euro would challenge the dollar as an alternative reserve currency. During the second month in the life of the new currency, however, the currency exchange value of the euro plummeted against the dollar
. . .

Some common words found in the essay are:
Little Olivei, Cour Macdonald, World War, IMS Predictions, EC Essentially, Community EC, System Leckow, Danish Swedish, Muller Straubhaar, Europeans Japanese, currency exchange, international monetary, reserve currency, monetary system, international monetary system, gold standard, little olivei, currency gold, international currency, olivei 1999, little olivei 1999, international currency exchange, exchange rate, currency exchange markets, currency exchange rate,
Approximate Word count = 2392
Approximate Pages = 10 (250 words per page)

More Essays on International Monetary System