REACTION PAPER ON HOW MONETARY SYSTEM AFFECTS BUSINESSES

INTERNATIONAL BUSINESS AND TRADE

Munsayac, Angela A.

International Monetary System facilitates the international economic exchange

for the reason that most countries have national currencies that are not recognized as
legal payment to foreign countries. Its essential element is facilitating the exchange of
goods, services, and capital among countries. According to Empire Resume, “The IMS
seeks to contribute to stable and high global growth while currently fostering price and
financial stability. The IMS regulates the balance of payments, which is an accounting
device that records all international transactions between a country and the rest of the
world for a given period…”

International monetary systems are developed to regulate the flow of money

around the world. It reallocates the capital, as well as investments from one country to
another. It determines the exchange rate of different currencies for international trade.
It sets rules and regulations that countries must abide in exchanging currencies with
each other.

As for me, it is vital that there are monetary systems regulating the currencies
around the globe. For sure, all businesses wanted to operate in a sound, stable and
predictable environment. That’s why global monetary system provides a predictable
mechanism for companies to exchange currencies. It can affect the cost of importations
and exportations of goods as currencies fluctuate. For example, if our business exports
goods for foreign consumptions, the sale price of the goods and the company’s profit will
vary depending on the exchange of currencies locally to the target foreign country.
Increase in exchange rate will bring favorable occurrences to the business since it will
result to higher value of their goods while decrease in exchange rates will do otherwise.
Also it can alert the company if the economy of the country is declining or rising. Aside
from the cost of imports and exports, monetary system can affect the quality of
competitiveness of the domestic business to the foreign businesses dealing with the
same products as the latter’s.
 I, therefore conclude that if we’re going to build a business engaging locally and
foreign countries, we must be aware of the guide the global monetary system provides.
We must understand that there could be fluctuations in currencies and that could be a
hindrance in making stable profit projections in the following years.

Sources:

 https://www.dummies.com/education/finance/international-finance/key-issues-about-the-
international-monetary-system/

 https://empireresume.com/what-is-the-international-monetary-system/

 http://www.economicsdiscussion.net/articles/international-monetary-system/4256

 https://www.quora.com/How-do-exchange-rates-affect-businesses