The document summarizes the evolution of international monetary systems from bimetallism before 1875 to the current flexible exchange rate system. It describes five stages of evolution: 1) bimetallism before 1875, 2) the classical gold standard from 1875-1914, 3) the interwar period from 1915-1944, 4) the Bretton Woods system from 1945-1972, and 5) the flexible exchange rate regime since 1973. For each stage, it provides brief details on the rules and factors that led to changes or collapses in the monetary system.

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308FIN-INTERNATIONAL FINANCE
Evolution of International Monetary System
Dr. Mital Bhayani
Ph. D (Financial Management), MBA(Finance), NET and SET (Management)
1
SanjivaniCollegeofEngineering,Kopargaon
DepartmentofMBA
www.sanjivanimba.org.in

2. www.sanjivanimba.org.inwww.sanjivanimba.org.inDept. of MBA, Sanjivani COE, Kopargaon
At the End of this video you should be able to:
“Describe the evolution of International monetary system.”
“ Review the history and contemplate its future prospects.”
Session Learning Outcome

3. www.sanjivanimba.org.inwww.sanjivanimba.org.inDept. of MBA, Sanjivani COE, Kopargaon
“ It is a institutional framework within which international payments are
made, movement of capital are accommodated and exchange rates
among countries are determined”
“ It includes agreements, rules, institutions, mechanisms and policies
regarding exchange rates, international payments and flow of capital.
International Monetary System
3

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Evolution of International Monetary System
Stage of Evolution
1.1. Bimetallism: Before 1875Bimetallism: Before 1875
22. Classical gold standard: 1875-1914. Classical gold standard: 1875-1914
3. Interwar period: 1915-19443. Interwar period: 1915-1944
4 . Bretton Woods System: 1945-19724 . Bretton Woods System: 1945-1972
5. Flexible exchange rate regime: 19735. Flexible exchange rate regime: 1973

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Bimetallism: Before 1875
• Gold and silver were used as international means of
payments and determining exchange rates.
• Presence of Bimetallic countries was must
• Collapsed: Gresham’s Law.(Bad Money drives out Good Money)
Brittan France India

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Classical gold standard: 1875-1914
• Three Rules to be followed:
1. Only gold to be used for international
payments
2. Two way convertibility between gold and
currency at a fixed rate
3. Gold may be freely exported or imported
• Advantages:
- Automatic BOP correction, Automatic
exchange rate correction, monetary
discipline, certainty in exchange rates
• Collapsed:
- Excessive currency
printing
- competitive
devaluation

7. www.sanjivanimba.org.inwww.sanjivanimba.org.inDept. of MBA, Sanjivani COE, Kopargaon
• Gold standard was followed but it was not classical
• Sterilization of gold was followed.
• By the end of world war II, gold standard was dead due to
competitive devaluations and restrictions on export and
import of gold.
• Britain suspended its convertibility of gold.
Interwar Period : 1915-1944

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Bretton Woods System (1944-1973)
• In July 1944 representatives from 44 different
countries gathered at Bretton Woods, New
Hampshire.
• Birth of two new institutions: IMF and IBRD
• System adopted – dollar based gold Exchange
rate
Collapse:
- Triffin paradox
- Nixon Shock

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Flexible exchange rate System 1973 to Present
• 1976- Jamaica Agreement
- Market determined exchange rate with government
intervention
- Gold was demonetized
- Preference to least developed countries for IMF assistance.

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Thank You!!