Monetary Systems of the 20th Century The Gold Standard - The gold standard began sometime in the 1880s
- It was premised on three basic ideas:
- A system of fixed rates of exchange existed between participating countries
- Money issued by member countries had to be backed by gold reserves
- Gold acted as an automatic adjustment
- Under this standard, each country’s currency would be set in value per ounce of gold
The Bretton Woods Agreement - The governments of 44 of the Allied Powers gathered together in Bretton Woods, New Hampshire in 1944 to plan for the postwar international monetary system
- This agreement called for the following:
- Fixed exchange rates between member countries
- The establishment of a fund of gold and currencies for stabilization of their currencies, the International Monetary Fund
- The establishment of a bank, the World Bank, that would provide funding for long-term development projects
Floating Exchange Rates - Since March 1973, the world’s major currencies have floated in value versus each other
- The inability of a country to control the value of its currency on world markets has been a harsh reality for most
- Direct intervention
- Coordinated intervention
- In 1979 a formalized structure was put in place among many of the major members of the European Community
- The European Monetary System (EMS) officially began operation in March 1979 and once again established a grid of fixed parity rates among member currencies
- The EMS consisted of three elements:
- First, all countries that were committing their currencies and their efforts to the preservation of fixed exchange rates entered the Exchange Rate Mechanism (ERM)
- Second, was the actual grid of bilateral exchange rates with their specialized band limits
- Third, was the creation of the European Currency Unit (ECU)
Do'stlaringiz bilan baham: |
