International Monetary system

Money and its functions

It’s a medium of exchange

Uniform standard for measuring value of goods and
services
It’s a widely accepted way to store value
 Role of Monetary System

Monetry system includes financial institutions,

Financial intermediaries and financial instruments.
With the help of these pillars capital formation takes
place. Financial intermediaries with the help of
instruments provide a platform known as financial
market to the savers of the funds and the users of the
funds here then can serve each other.
 International Monetary system

International Monetry system refers to the system

prevailing worldwide to monitor foreign exchange
markets with the help of this international business
and capital movement takes place.
It is a set of agreed rules, conventions accepted
worldwide that facilitate international trade among
the nations.
 Silent features of(IMS)

Stability in foreign exchange. So that people have

confidence in the system
Efficient an free flow of trade across the states.
Provide liquidity to the countries to adjust their
Balance of Payment(BOP)
 TIMELINE IN (IMS)

Before 1875 called Bimetallism

1875-1914 Classical gold standard
1915-1944 First and second world war period
1945-1972 Breton Woods System
1973-onwards Exchange rate regime
 Before 1875 called Bimetallism

Bimettalism means double standard in which gold

and silver both were used as money.
Some countries were on gold standard some on the
silver and some were adopting both.
 1875-1914 Classical gold standard

This period is gold standard.

Gold can be freely exported or imported.
Exchange rate would be determined by relative gold
content , each country defined the value of its
currency in terms of gold.
Central banks are restricted not to issue more
currency than gold reserves.
 1915-1944 World war period

World economy was tremendously instable and

global depression was prevailing.
All the countries suffered with poor trade conditions
and the entire world was facing economic
disintegration.
All the countries required international cooperation
which leads to Breton Woods agreements.
 1945-1972 Breton Woods System

A meeting was held in the year 1944 at Breton

Woods of 44 nations.
The purpose was to design new IMS without the gold
standard.
To maintain the foreign exchange stability in IMS
System , IMF.
World was created to promote economic
development.
ITO was in discussion.
 Contd…..

Under this system the US dollar was fixed to gold at

$35 per ounce and other currencies were fixed to US
dollar.
The Breton Woods System was a dollar based gold
exchange standard.
By 1973 the world had moved to search for a new
financial system , a system no longer relied on a
world wide system of fixed exchange rate.
 1973-onwards Exchange rate regime
(Present System)

Gold was abandoned as an international reserve

asset.
Flexible exchange rates were declared acceptable to
the IMF members.
Market forces will determine the currency value.
The currencies are no longer backed by gold.
 References:

Aswathappa, International Business TMH new Delhi

Madhu vij, International financial
Management,Prentice Hall of India New Delhi.
THANK
YOU!!