Sie sind auf Seite 1von 6

History of the International Monetary System

The international monetary system establishes the rules by which countries value and exchange their currencies. It also provides a mechanism for correcting imbalances between a countrys international payments and its receipts. Further, the cost of converting foreign money into firms home currency-a variable critical to the profitability of international operations depends on the smooth functioning of the international monetary system. The history of monetary system started when in ancient time (seventh century B.C.1) tribes & city-states of India, Babylon & Phoenicia used gold & silver as media of exchange in trade. The total history of international monetary system is discussed below in a chronological order.

1.

The Gold Standard, 1876-1913


The gold standard created a fixed exchange rate system. Countries set par value for their currency in terms of gold. This came to be known as the gold standard and gained acceptance in Western Europe in the 1870s.The US adopted the gold standard in 1879.The rules of the game for the gold standard were simple Example: US$ gold rate was $20.67/oz, the British pound was pegged at 4.2474/oz US$/ rate calculation is $20.67/4.2472 = $4.8665/ Because governments agreed to buy/sell gold on demand with anyone at its own fixed parity rate, the value of each currency in terms of gold, the exchange rates were therefore fixed. Countries had to maintain adequate gold reserves to back its currencys value in order for regime to function. The gold standard worked until the outbreak of World War I, which interrupted trade flows and free movement of gold thus forcing major nations to suspend operation of the gold standard

The Gold Standard variously specified how the gold backing would be implemented, including the amount of specie per currency unit. The currency itself is just paper and so has no innate value, but is accepted by traders because it can be redeemed any time for the equivalent specie. A US silver certificate, for example, could be redeemed for an actual piece of silver5. Starling-Based Gold Standard: From 1821 until the end of 1918, the most important currency in international commerce was the British pound sterling because of the United Kingdoms large territory due to dominant economic and military power. So, most of the people relayed on pound that time. As a result international monetary system during this period is also called starling-based gold standard. Because of the international trust London became a dominant international center in the 19th century, a position it still holds8. World War I: During World War 1, the sterling-based gold standard unraveled. With the outbreak of war, normal commercial transactions between the Allies (France, Russia, and the United Kingdom) and the Central Powers (Austria-Hungary, Germany, and the Ottoman Empire) ceased. The economic pressures of war caused country after country to suspend their pledges to buy or sell gold at their currencies' par values. Example of the Gold Standard Consider a world with two countries denoted A and B and Suppose that Country A runs a balance of trade surplus, i.e. its exports exceed its imports. Country A exports goods and imports gold. Its money supply increases, which increases the price of its goods and services. The reverse occurs in B The increase in As prices and the decrease Bs prices will eventually correct the trade imbalance.

The Inter War Year and World War II, 1914-1944


During World War I, currencies were allowed to fluctuate over wide ranges in terms of gold and each other, theoretically, supply and demand for imports/exports caused moderate changes in an exchange rate about an equilibrium value. The gold standard has a similar function. In 1934, the US devalued its currency to $35/oz from $20.67/oz prior to World War I. From 1924 to the end of World War II exchange rates were theoretically determined by each currency's value in terms of gold. During World War II and aftermath, many main currencies lost their convertibility. The US dollar remained the only major trading currency that was convertible Competitive Devaluation of Currencies & Increased Tariff Rate: After the United Kingdom abandoned the gold standard, a "sterling area emerged as some countries, Primarily members of the British Commonwealth, pegged their currencies to the Pound and relied on sterling balances held in London as their international Reserves. Other countries tied the value of their currencies to the U.S. dollar or the French franc. Some countries (United States, France, United Kingdom, Belgium, Latvia, the Netherlands, Switzerland & Italy) were deliberately & artificially devaluating their official value of currencies to make their goods cheaper in the international markets, which is stimulating its exports and reducing its imports. But, none were getting the benefit due to competitive devaluation at almost same percentage that is each currency's value relative to the other remains the same. Most countries also raised the tariffs they imposed on imported goods in the hope of protecting domestic jobs in import-competing industries. Nations adversely affected by trade barriers of any kind are quite likely to impose retaliatory or reciprocal tariffs.

Effect of beggar-thy-neighbor policies (World War II): As more and more countries adopted beggar-thy-neighbor policies like devaluation of currencies and increasing the tariff rate on imported goods, international trade contracted that hurt employment in each country's export industries. More ominously, this international economic conflict was soon replaced by international military conflict that was the outbreak of World War II in 1939.3.

Bretton Woods and the International Monetary Fund, 1944


Allied powers met in Bretton Woods, NH and created a post-war international monetary system. The agreement established a US dollar based monetary system and created the IMF and World Bank.Under original provisions, all countries fixed their currencies in terms of gold but were not required to exchange their currencies.Only the US dollar remained convertible into gold (at $35/oz with Central banks, not individuals).Therefore, each country established its exchange rate vis--vis the US dollar and then calculated the gold par value of their currency.Participating countries agreed to try to maintain the currency values within 1% of par by buying or selling foreign or gold reserves.Devaluation was not to be used as a competitive trade policy, but if a currency became too weak to defend, up to a 10% devaluation was allowed without formal approval from the IMF Post-War Situation: World War II created inflation, unemployment and an instable political situation. Every country was struggling to rebuild their wartorn economy.

Bretton Woods Conference: Not to repeat the mistakes that had caused World War II, to promote worldwide peace & prosperity and to construct the post war international monetary system representatives of 44 countries met at a resort in Bretton Woods, New Hampshire in 1944. Decisions & Outcome of the Bretton Woods Conference: The Bretton Woods Conference has presented the world two historic agreements. These are as follows: A. Agreement of conferees to renew the gold standard on a modified basis. B. Agreement to create two new international organizations to assist the rebuilding of the world economy and the international monetary system. These area. International Bank for Reconstruction and Development (IBRD) b. International Monetary Fund (IMF)

Fixed Exchange Rates, 1945-1973


Bretton Woods and IMF worked well post World War II, but diverging fiscal and monetary policies and external shocks caused the systems demise. The US dollar remained the key to the web of exchange rates heavy capital outflows of dollars became required to meet investors and deficit needs and eventually this overhang of dollars held by foreigners created a lack of confidence in the US ability to meet its obligations The IMF today is composed of national currencies, artificial currencies (such as the SDR), and one entirely new currency (Euro).All of these currencies are linked to one another via a smorgasbord of currency regimes , countries would prefer fixed exchange

rates. Fixed rates provide stability in international prices for the conduct of trade. Fixed exchange rates are inherently anti-inflationary, requiring the country to follow restrictive monetary and fiscal policies. Fixed exchange rates regimes necessitate that central banks maintain large quantities of international reserves for use in occasional defense of fixed rate. Fixed rates, once in place, may be maintained at rates that are inconsistent with economic fundamentals. The US$ was the main reserve currency held by central banks. Persistent deficits in the U.S. balance of payments had to be financed by heavy capital outflows of dollars. Foreigners, having accumulated huge reserves of US$, eventually lost confidence in the ability of the U.S. to convert dollars to gold.

Das könnte Ihnen auch gefallen