Presentation

on

IMS
 Pre – Bretton Woods
Period
 Gold standard (1875 –
1914)
 Currency defined in terms of
gold
 Conversion of paper money
into gold
 No restrictions on shipment
 Price – specie – flow
mechanism
 Pre – Bretton Woods
Period
 World War I (1914 – 1918)
 Inconvertible paper
currencies
 Restrictions on shipment
 Post War Period
 Gold standard restored
 Great Depression (1929 –
1933)
 1931 - Great Britain
 Bretton Woods Period
 United Nations Monetary
and Financial Conference
 44 nations participated
 Proposal for establishment
of
• IMF
• IBRD
• ITO
 Dollar based IMS
 Bretton Woods Period
 Functions of IMS
 Exchange rate stability
 Finance short term deficits
 Issue SDRs
 Exchange Rate Stability
 Par Value System / Pegged
Exchange Rate System
 Define currency in terms of
Gold / $
 Maintain the value within
1% To
(-1%) of par value
 Dollars redeemed in gold
upon demand
 Exchange Rate Stability
 Provisions for agreement
relating to changes in Par
Value
 Up to 10 % - No approval
required
 10% - 20% - IMF have to
declare within 72 days
 More than 20% - No limit of
time of declaration
 Credit Facilities
 Dependent on quota in IMF.
 Determined on the basis of nation ‘s
imports, ratio of exporters ,
variability of imports, income etc.
 25% in Gold/Us$ & 75% in member
state’s own currency.
 SDRs

 Requirement of liquidity.
 1970- Issue of SDRs.
 Value is calculated on basis of basket
of currencies.
 Breakdown of Bretton
Woods System
 Liquidity was required.
 More outflow required from
USA.
 Brought deficit in BOP in
USA.
 Huge accumulation of
dollars abroad.
 USA refused to buy / sell
gold at $35/ounce.
 Calls for a "New Bretton
Woods"
 On October 13, 2008, British Prime
Minister Gordon Brown said world
leaders must meet to agree to a new
economic system:
“We must have a new Bretton
Woods, building a new international
financial architecture for the years
ahead.”
 IMF
The International Monetary
Fund (IMF)
An international organization
Oversees the global financial
system
Offers financial and technical
assistance to its members
An international lender of last
resort.
Its headquarters are located in
Washington, D.C., USA.
 Functions of IMF
 Surveillance .

 Lends

 Provides countries with technical assistance and training

 Research and data

 Purpose
 To stabilize exchange rates
 To assist the reconstruction of the world's
international payment system.
 To secure financial stability
 To facilitate international trade
 To promote high employment and
sustainable economic growth
 To reduce poverty
 Membership qualification
 IMF is an organization of 185 countries .

 Any country can apply for its membership.

 A member's quota in the IMF determines the

amount of its subscription, its voting weight, its
access to IMF financing, and its allocation of
Special Drawing Rights (SDRs).

 US has the exclusive veto power.

 India And IMF
 the IMF has provided financial assistance to India,
which has helped in boosting the country's economy.
 The loans provided by IMF to India:
 SDR 3,260,405,000 in 1992
 SDR 3,584,905,000 in 1993
 SDR 2,763,180,833 in 1994
 SDR 1,966,633,125 in 1995
 SDR 1,085,250,003 in 1996
 SDR 589,791,667 in 1997
 SDR 284,916,664 in 1998
 SDR 38,500 in 1999