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Global Political Economics: Group Members

The document discusses international monetary systems. It defines an international monetary system as a set of rules, conventions, and institutions that facilitate international trade and capital flows between nations. It provides three key roles: ensuring exchange rate stability, facilitating balance of payments adjustments, and ensuring access to international liquidity. The document then outlines some crucial elements and mechanisms for establishing a consistent international monetary system, including automatic adjustment mechanisms, the N-1 system, international coordination, and monetary unions.

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Muzammil Aghadi
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60 views5 pages

Global Political Economics: Group Members

The document discusses international monetary systems. It defines an international monetary system as a set of rules, conventions, and institutions that facilitate international trade and capital flows between nations. It provides three key roles: ensuring exchange rate stability, facilitating balance of payments adjustments, and ensuring access to international liquidity. The document then outlines some crucial elements and mechanisms for establishing a consistent international monetary system, including automatic adjustment mechanisms, the N-1 system, international coordination, and monetary unions.

Uploaded by

Muzammil Aghadi
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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Global Political Economics

Group Members:
Syed Haseeb ul Haq Naveed Humayun Inam Muhammad Muzammil

Topic: International Monetary System

International monetary systems are sets of internationally agreed rules, conventions and supporting institutions that facilitate international trade, cross border investment and generally the reallocation of capital between nation states. They provide means of payment acceptable between buyers and sellers of different nationality, including deferred payment. To operate successfully, they need to inspire confidence, to provide sufficient liquidity for fluctuating levels of trade and to provide means by which global imbalances can be corrected. The systems can grow organically as the collective result of numerous individual agreements between international economic actors spread over several decades. International monetary system = system of rules, mechanism and institutions that connects the national monetary systems into a consistent whole Role of the international monetary system: ensure exchange rate stability facilitate balance-of-payments disequilibria correction ensure access to international liquidity

Crucial Elements of International Monetary System:


Balance-of-payments adjustments: Balance-of-payments disequilibria elimination process and to maintain the long-run equilibrium in the current account. International liquidity facilitation: To maintain the high level of liquidity with the central bank.

International Liquidity Facilitation:


International liquidity under the ownership of all other agents in the economy: Operative foreign exchange reserves of commercial banks Foreign exchange assets of non-banking subjects abroad Short-term foreign assets of the residents Long-term, prenosljive foreign bonds of the residents

Possibilities of the banks to get credits for financing balance-of-payments deficit abroad

Sources of financial assets to increase IMR: Private sources of capital Public sources of capital

Mechanisms for Establishing a Consistent International Monetary System:


There are four mechanisms for establishing a consistent IMS: Automatic adjustment mechanism N-1 system International coordination system Monetary union system

Automatic Adjustment Mechanism:

N-1 system:
Countries with a surplus are under significantly lower pressure to adjust their balanceof-payments. N-th country currency (n-currency) is convertible into a widely accepted good at a fixed price, the currencies of all other countries are related to it in a fixed relationship Countries must accept and implement economic policy measures for balance-ofpayments adjustments

International Coordination System:


Economic policy coordination of the world economic forces & exchange rate movement coordination. Crucial: exchange rate establishment choice. Reasons for balance-of-payments disequilibrium: External shocks Weak or no accordance in the economic policy of individual countries

Monetary Union:
Countries completely give up their national monetary policy and surrender it to some above-national institution Common currency becomes the only legal tender in all monetary union member countries

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