2. MEANING OF IMS:
• The international monetary system is a framework of
rules, institutions, and agreements that govern
international transactions and flows of money and
currencies among countries.
• It provides the basis for the exchange of goods and
services across borders and for international investment
and finance
3. Evolution of IMS:
1. Gold Standard (1870s-1914)
2. Interwar Period (1918-1939): The interwar period was
marked by a breakdown of the gold standard,
competitive devaluations, and the use of exchange
controls. These policies contributed to a global
economic crisis and hindered international trade and
investment.
3. Bretton Woods System (1944-1971)
4. Flexible Exchange Rates (1971-Present)
4. GOLD STANDARD
The first international monetary system was based on the
gold standard, which prevailed from the late 19th century
until the outbreak of World War I. Under the gold standard,
countries pegged their currencies to a fixed amount of gold,
which was used to settle international trade and financial
transactions.
5. Bretton Woods System
• The Bretton Woods system was established in 1944 in the
aftermath of World War II to provide a more stable and
predictable international monetary system. Under the
Bretton Woods system, the US dollar was pegged to gold,
and other currencies were pegged to the US dollar. The
system also established the International Monetary Fund
(IMF) and the World Bank to promote international
cooperation and development.
6. The flexible exchange rate
regime
• The flexible exchange rate regime is a monetary system
in which the exchange rate of a currency is determined by
the forces of supply and demand in the foreign exchange
market. In other words, the exchange rate is allowed to
fluctuate freely based on market conditions, without
intervention from the central bank or government.
7. The current exchange
rate arrangement
• The current exchange rate arrangement refers to the
system in which different currencies are traded and their
values are determined relative to each other. There are
several exchange rate arrangements that countries can
adopt, including fixed exchange rates, floating exchange
rates, and managed exchange rates.
8. The economic and
monetary union
• The Economic and Monetary Union (EMU) refers to the
integration of the economies and monetary systems of
European Union (EU) member states. The primary goal
of the EMU is to create a single economic market and a
common currency, the euro, which is used by 19 of the 27
EU member states
9. Base Components of EMU:
• The European Central Bank (ECB), which is responsible
for implementing monetary policy in the eurozone and
ensuring price stability.
• The Stability and Growth Pact, which aims to coordinate
policies among member states and maintain sound public
finances.
• The Economic and Monetary Union Treaty, which sets
out the legal framework for the EMU and outlines the
rules and procedures for adopting the euro and
participating in the EMU.