international monetary system

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International monetary system

The global network of government and commercial institutions within which currency exchange rates are determined.
Copyright © 2012, Campbell R. Harvey. All Rights Reserved.

International Monetary System

In foreign exchange, the complete network of governments and institutions that affect currencies. The system has a set of agreed-upon rules that allows for international trade of goods and services. It is important to note that one government's decisions may affect the international monetary system. For example, many countries peg their currencies to the U.S. dollar; when the Federal Reserve makes changes to American monetary policy, it affects those currencies as well. Likewise, import and export laws and decisions on the convertibility of currencies have sometimes significant effects on the international monetary system. See also: Bretton Woods.
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved
International monetary systemclick for a larger image
Fig. 98 International monetary system. Types of international monetary system.

international monetary system

a system for promoting INTERNATIONAL TRADE and SPECIALIZATION while at the same time ensuring long-run individual BALANCE OF PAYMENTS EQUILIBRIUM. To be effective, an international monetary system must be able to:
  1. provide a system of EXCHANGE RATES between national currencies;
  2. provide an ADJUSTMENT MECHANISM capable of removing payments imbalance;
  3. provide a quantum of INTERNATIONAL RESERVES to finance payments deficits. In addition, because of the structural weaknesses of some countries, particularly DEVELOPING COUNTRIES, financial aid facilitates are required to help resolve problems of indebtedness (see INTERNATIONAL DEBT).

The three functions identified above are highly interrelated, and a crucial role is played by the degree of fixity or flexibility built into the exchange rate mechanism, as Fig. 98 indicates. Thus, if exchange rates are rigidly fixed (see FIXED EXCHANGE RATE SYSTEM), balance of disequilibriums can only be removed by internal price and income adjustments (see BALANCE OF PAYMENTS EQUILIBRIUM), and countries will need to hold large stocks of international reserves to cover deficits while the necessary adjustments are given time to work. By contrast, where exchange rates are free to fluctuate in line with market forces (FLOATING EXCHANGE RATE SYSTEM), continuous external price adjustments will work to remove incipient imbalances before they reach serious proportions, thus reducing countries’ reserve requirements. Various international monetary systems have been tried, including the GOLD STANDARD and, currently, the INTERNATIONAL MONETARY FUND system. See EUROPEAN MONETARY SYSTEM.

Collins Dictionary of Economics, 4th ed. © C. Pass, B. Lowes, L. Davies 2005
References in periodicals archive ?
Exorbitant privilege: The rise and fall of the dollar and the future of the international monetary system. New York: Oxford University Press.
But this is a very short-sighted approach, because confidence in the current principles of the international monetary system have been seriously undermined, and more and more countries are thinking about how to avoid any dependence on this international monetary financial system," Lavrov said.
Keywords: International Monetary System; Monetary Unipolarity/Multipolarity; Triffin Dilemma; Complexity Economics; Complex Adaptive Systems.
This will involve sessions on the role of trade and investment agreements in boosting investment opportunities and the challenge of managing capital flow volatility, with a special session on the potential role of SDRs in improving the international monetary system. The discussions in the TGM will focus on the challenges faced by policy makers in these areas and the multilateral actions necessary to support domestic policy efforts.
"From Great Depression to Great Recession" is comprised of papers given at a 2015 symposium of eminent scholars convened by the IMF to discuss how history can inform current debates about the functioning and challenges of the international monetary system. An introductory chapter sets the stage for the other chapters in the volume by giving a broad overview of the performance of the international monetary system over the past century, highlighting the key events and challenges that shaped it.
And with renewed interest in the stability of the international monetary system, some are asking - including within the IMF - whether revamping the SDR could be part of an effective effort to re-energise multilateralism.
And with renewed interest in the stability of the international monetary system, some are asking -- including within the IMF -- whether revamping the SDR could be part of an effective effort to re-energize multilateralism.
The two advisory committees will discuss matters relating to the international monetary system, slowdown in emerging markets' growth, migrations, global risks and measures to ensure a stable monetary system worldwide as support to sustainable development.
The seminar included three parallel breakout sessions, strengthening policy frameworks to tackle increased volatility, global financial safety nets and how to enhance them and strengthening the resilience of the international monetary system.
Anyone looking at recent financial headlines could be forgiven for thinking that the international monetary system is under heavy strains.
International Monetary System: Past, Present and Future, by Dr.

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