At the end of this topic the students will be able to: Commented [Office1]: Punctuation

Corrected: topic, the students…

• Understand the International Monetary System
• Explain Global Financial System
• Enumerate the key players in the monetary and financial systems

The international monetary system involves policies and official agreements

affecting the international balance of payments, particual the agreements for exchange Commented [Office2]: Conciseness
rates. It is the institutional structure, laws, and procedures for exchanging national Concise: particularly
currencies with each other. It has evolved from the Gold Standard (value of currencies
attached to gold) and the Bretton Woods System (exchange rates attached to the US
dollar) to the new system containing two main forms (and their mix) of foreign exchange
management. In order to understand the International monetary system, one has to be Commented [Office3]: Corrected: understand the
international monetary system
oriented with the following:

o The Gold Standard, 1876-1913

o BRETTON WOODS AND THE INTERNATIONAL MONETARY FUND
o (IMF), 1944-1973 (Download article at https://bit.ly/3jE9hvK ) Commented [Office4]: Please remove the colon.
Commented [K5R4]: done

Foreign currency exchange rate or exchange rate is the nation's money in units of
another cash or product (commonly gold or silver). On the off chance that the
administration of a nation, for instance, Argentina – controls the rate at which its money Commented [Office6]: Punctuation
Corrected: nation, for instance,
the peso-is traded for different monetary standards, the framework or system is delegated
Commented [K7R6]: done
a fixed overseen standard conversion system. The rate at which the currency is fixed, or
pegged, is frequently referred to as its par value. If the government does not interfere in
its currency valuation in any way, we classify the currency as floating or flexible.

Floating exchange rate: a mechanism in which the exchange rate is changed

continuously according to the laws of supply and demand. A country employs this
mechanism to tie its currency value to some other widely-used commodity or currency.

A system under which the exchange rate is set. A country employs this system when
it attaches its currency value to some other commodity or widely used currency.Also, most
international transactions use the dollar and many fixed exchange rates today are tied to US dollar.
Countries often match their currencies to those of their most common trading partners
(Amadeo, 2020).

Read article: Fixed Exchange Rates: Pros, Cons, and Examples

A currency is permitted to float freely in a managed float, but the government still
intervenes by buying and selling the currency (if it feels that the currency is far from its
fair value).

The global financial system is the group of financial institutions that promote and
control worldwide investment and capital flows, e.g., central banks, commercial banks, and Commented [Office8]: Punctuation
Corrected: e.g.,
stock exchange.
Commented [K9R8]: done

• The firm (MNEs, SMEs, insurance firms, stockbrokers, Western Union)

• National stock (equity) exchanges and bond (debt) markets
• Banks (commercial, investment, merchant, private, offshore banks) Commented [Office10]: Please consider deleting this
• Central banks (The Federal Reserve Bank of the US, The European Central Bank) abbreviation.

• International Monetary Fund (IMF), World Bank, Bank for International Settlements (BIS)

The globalization of financial flows has yielded many benefits. This has increased Commented [Office11]: Spelling
access to funding for businesses around the world. For instance, leading companies from American variant: globalization
emerging markets can list in stock exchanges in developed countries. Example: TCS Commented [K12R11]: Fixed
Group, Russia's credit card firm, listed in London.

However, there are also threats related to the globalisation of finance. Contagion is a
tendency of a financial or monetary crisis in one country to spread rapidly to others due
to global financial links. Example: Asian Financial Crisis of 1997-1998 has spread from
several Asian countries to other emerging markets such as Russia (1999) and Argentina
(2001).
Commented [Office13]: Noun Plural

Corrected: Instructions
Commented [K14R13]: done
 5.

Grozdanovska, V., Jankulovski, N., & Bojkovska, K. (2017, January). International Business and Trade.
International Journal of Sciences:, 106-114. Retrieved July 13, 2020, from
https://gssrr.org/index.php?journal=JournalOfBasicAndApplied?journal=JournalOfBasicAndA
pplied

Amadeo, K. (2020, January 15). Fixed Exchange Rates: Pros, Cons, and Examples. Retrieved from The
Balance: https://www.thebalance.com/fixed-exchange-rate-definition-pros-cons-examples-
3306257

Zámborský, P. (2019). International Business and Global Strategy. (2nd Edition). Retrieved 2020,
from https://bookboon.com/premium/reader/international-business-and-global-strategy

https://courses.lumenlearning.com/suny-internationalbusiness/chapter/reading-what-is-the-
international-monetary-system/