Create a new account

It's simple, and free.

International Monetary System

ystem on the American trade balance and on the capacity of the nation to generate the inflow of foreign capital necessary to offset its international trade deficit without re-igniting inflation remains arguable. In the mid-1980s, however, the rapidly fluctuating international exchange values of the currencies of the major western industrial countries were having significant and detrimental impacts on both international trade and domestic economies. Recognition of this fact led the major western financial countries to introduce in 1986 what amounts to a managed float. The member countries of the European Community (EC) had operated such a managed float for several years, as a means of controlling the internal currency exchange rates within the EC. Essentially, a managed float means that participating nations mutually agree on exchange-rate ranges. When the exchange value of a participating currency breaches the limits of its range, the affected agrees to take appropriate steps, including entering the international currency exchange markets, to correct the problem. The other participating countries agree to assist through actions of their own which frequently include entering the international currency exchange markets (Leckow, 1999).

An economy is on the gold standard when its central bank is required to provide gold in exchange for any of the country's currency presented to the central bank. In the United States, the Federal Reserve System acts as the country's central bank. In practice, if the United States economy were on the gold standard, without any restrictions, holders of United States currency could redeem the currency for gold at any commercial bank that is a member of the Federal Reserve System (Leckow, 1999).

The gold standard was essential to the classical economic approach to the maintenance of equilibrium in international trade. Classical economic theory viewed international currency exchange rates as fixed...

< Prev Page 2 of 10 Next >

More on International Monetary System...

Loading...
APA     MLA     Chicago
International Monetary System. (1969, December 31). In LotsofEssays.com. Retrieved 04:23, March 29, 2024, from https://www.lotsofessays.com/viewpaper/1696221.html