Chap 10

The International Monetary System

Chapter Outline

Opening Case: Argentina’s Monetary Crisis

Introduction

The Gold Standard

Mechanics of the Gold Standard Strength of the Gold Standard The Period between the Wars, 1918-1939

The Bretton Woods System

The Role of the IMF The Role of the World Bank

The Collapse of the Fixed Exchange Rate System

The Floating Exchange Rate Regime

The Jamaica Agreement Exchange Rates Since 1973 Country Focus: The U.S. Dollar, Oil Prices, and Recycling Petrodollars

Fixed Versus Floating Exchange Rates

The Case for Floating Exchange Rates The Case for Fixed Exchange Rates Who is Right?

Exchange Rate Regimes in Practice

Pegged Exchange Rates Currency Boards

CRISIS MANAGEMENT BY the imf

Financial Crisis in the Post-Bretton Woods Era Mexican Currency Crisis of 1995 The Asian Crisis Evaluating the IMF’s Policy Prescriptions Country Focus: Turkey and the IMF

FOCUS ON mANAGERIAL IMPLICATIONS

Currency Management Business Strategy Management Focus: Airbus and the Euro Corporate - Government Relations

SUMMARY

Critical THINKING AND Discussion Questions

CLOSING CASE: China’s Managed Float

Learning Objectives

1. Be familiar with the historical development of the modern global monetary system.

2. Discuss the role played by the World Bank and the IMF in the international monetary system.

3. Be familiar with the differences between a fixed and floating exchange rate system.

4. Know what exchange rate regimes are used in the world today, and why countries adopt different exchange rate regimes.

5. Understand the debate surrounding the role of the IMF in the management of financial crises.

6. Appreciate the implications of the global monetary system for currency management and business strategy.

Chapter Summary

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