国际金融英文版ch4.ppt

Chapter 4 International Monetary System Definition of the International Monetary System International monetary system is a set of conventions, rules, procedures and institutions that govern the conduct of financial relations between nations. International monetary system is based on the exchange rate system adopted by individual nations. The exchange rate system is a set of rules governing the value of a currency relative to other currencies. The Classical Gold Standard (1876 – 1914) The gold standard was a commitment by participating nations to fix the price of their domestic currencies in terms of a specified amount of gold. The government announces the gold par value which is the amount of its currency needed to buy one ounce of gold. Therefore, the gold was the international currency under the gold standard. Gold Standard and Exchange Values Pegging the value of each currency to gold established an exchange rate system. The gold par value determined the exchange rate between two currencies known as “mint par of exchange” Example of gold export and import If the gold par value in New Zealand was NZ$125/ounce and A$100/ounce in Australia, so mint par of exchange: 100/125 = A$0.80/NZ$ Costs of gold transportation: A$0.008/NZ$ The exchange rate would fluctuate between (0.80 + 0.008) = 0.8008 and (0.80 – 0.008) = 0.792 0.8008 and 0.792 are called gold export and import points. Price-specie-flow mechanism Performance of the gold standard Long-term price stability (lower inflation rate) 0.1% (1880 – 1914), 4.2% (1946 – 1990) No central bank needed Vulnerable to real and monetary shocks Inflation in one country would influence prices, money supply and real income of another country. The International Monetary System from 1914 to 1944 World War I interrupted trade and the free movement of gold. Main countries suspended convertibility of gold. They also imposed embargoes on gold exports. Exchange rate were fluctuated over fairly