THE FLOATING EXCHANGE

RATE REGIME
THE JAMAICA AGREEMENT
MAIN ELEMENTS:

 Floating rates were declared acceptable.

 Gold was abandoned as reverse asset.

 Total annual IMF quotas were increased.

EXCHANGE RATES SINCE 1973
1. The oil crisis in 1971.
2. The loss of confidence in the dollar.
3. The oil crisis of 1979.
4. The unexpected rise in the dollar between 1980
& 1985.
5. The rapid fall of the U. S. dollar against the
Japanese yen and German deutsche mark
between 1985 & 1987.
6. The partial collapse of the European Monetary
System in 1992.
7. The 1997 Asian currency crisis.
FACTORS LEADING TO FOREIGNER’S
RELUCTANCE IN REIVESTMENT
1. Slowdown in U.S. economic activity &
sluggish recovery.

2. Expansion of U.S. govt.’s budget deficit.

3. “Talk–down” of value of dollar by the U. S.

officials.