CHAPTER Learning Objectives Intemational monetary system manifests in the arrangements that facilitate international paymens ii as well as international liqui lity. The present chapter trace: and focuses on the IMF system. In Particular, it attempts: * To explain the earliest monetar Ss the developments in this regard during 1930s, * To explain the IMF's exchange + Exchange Rate Regime and the To explain the present system of fate regime during 1945-73, known as the Bretton Woods reasons behind its collapse,‘same paxy Iv pasvyoind oom sueq pos ‘uo!ss9AUOD Joy PUL 4]20N1p Plo VJOAUOD JOU 91am Sa}oU yuBq [eNprArpUl “aAEUIOD PIO UFEUTELE op 8 plod jo saltequeape 12 Pey a] “Pempunys 09 ou jo worssa poypour y paopumys pjo# Jo Loy ysound nyo ye aptad 9) SEA IY “ey oy paBucyoxs ose pue payurar azom suioo plod “ySA ou PU A MH Uy Ie "28 41] Sundopy sound ayy |[v UL ous OY JOU SUM prEPUEAS PIO JO WLIO} AN, suuod yuaayIQ jpaepueys pro ays Joy Sep-Koy ayy sem “ze PROM 3844 OY Jo YeouqInO ay [1H puE GINQUoD yruodjoUrE ax Jo KOUARND sey ay, “GUST UE INS pmo} SOVEIg PUN ay} PUL ‘TABT Ut I! padope AuetLI05 ‘podope Ajapim sem paupunns plod axp “Sougt au) Sq -Ig9p a1eatad pue ax{qnd Jo yuoused 105 ropuo} jeroyjo ay ouer9q Plo# WAY gTRI UE pasUNoWUE SjpeIDYJO SBA IF ING PIOB JO pawn svx punod ayy ua SanquAD uIMUOADS 941 ug ur pareusizo a “prepueys Syrpourtuos ajsads ayy ueya saunquay sopeoag passossod pxepUnIS PIOH OL GUVGNVIS G105 sjuauiXed Joyo puw apex so yuauiaryies pady sojouasano asauy, 11 8M “9r'T oy one yyppjoui-ouow @ dope saSuvyp quia tay yng ‘panpunys YSN. tN UT spOIs PIO Jo PIo¥ Jo y20dxo SA) MIP SUL, “VULAY WI "SET OY SET sem 4 g08T 29 94) Jo aauatiaue [EA SHE poxy Pu AIIUNED ax Jo sO BY oBeuIoy 4, 19 paswqap aavjdas asouwye sur09 UL quawasnqop wo jo ssao0ad 24, PS 40} pose sjurwUt oy ayo yey yy a0y vouvay paseduroo st to pavpunis 33 @} Pay St, “9AlIS pute ploB Jo suu4Dy a1 glun A2ejauow! a4} $e awJop Oy pardoode ©) poy 1 woqezita usonty pus post Aq wo! 4 9s 40y “2900'S Puyo Ase wi yUsoysyid exchange standard was an een mare economia form of dnd where neither gold coinage was required, nor the conver ia purchase af bars existed. A country on the gold exchange standard linked its currency tq the gold specie standard. If country on the gold exch ard held the pound as its res cuurreney was convertible into pou and the pound was eonvertible into gold. Thus, convertibility existed but nat d The country reaped the advantages of the gold standard so long as its specie standard. Many eountries maintain ‘avian eountries adopted it in 1885 ay, eld huge reserves of British treasury bile The Broad Rules ‘The essential features of the gold standard were: ‘+ The government adopting it fixed the value of currency in terms q specific weight and fineness of gold and guaranteed a twona; v + Export and import of gold were allowed so that it could flow freely among the gold-standard countries + The central bank acting as the apex monetary institution, held reserves in direct relationship with the currency it had issued + The government allowed unrestricted minting of gold and melting gold coins at the option of the holder. Since fixed weight of gold had formed the basis for a unit of the currency ant since free flow of gold was allowed among the countries, the gold standard possess ‘chanism for domestic price stability, fixed exchange rates, ati ance of payments. 1e mechanism of exchange rates, The rates depended jut iferent currencies, Suppose a pound sterling contained + dollar contained a one-fourth ounce of gold, the exchange ness was valued at $ 20,67. Natu $ 20.67/4.24 or § 4.87. This rate was known as th nge rate, int which cou! of trade thus reducing the money supp