Transcript Międzynarodowy system walutowy

The international monetary system
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Lecture outline
 The notion and the functions of the IMS
 Gold standard system
 The gold bullion standard
 The Bretton Woods system
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IMS definition
 A set of rules, procedures, instruments and
institutions which are necessary to settle
international payments
Source: A. Budnikowski, Międzynarodowe stosunki gospodarcze, PWE, Warszawa 2006.
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The reasons for the creation of IMS
The necessity of international economic
cooperation
The efficiency of the international payment
system
 Facilitation of international trade
 Facilitation of international capital flow
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IMS functions
 Ensuring international money supply
 Ensuring international liquidity
 Ensuring a global payment equilibrium
 Creating a framework for the national economic
policy
 Contributing to international economic
stabilisation
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International money
 Unit of account
 Medium of exchange
 Store of value
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International money
Private
transactions
Official
transactions
Function
Price quotation
Reference currency
Unit of account
Transaction currency
Intervention currency
Medium of
exchange
Investment currency
Reserve currency
Store of value
L. Oręziak, Euro nowy pieniądz, PWN, Warszawa 2002.
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International money
 Criteria
 Large share in global exports
 Credibility concerning the value of the currency
 A well developed financial market
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International money
 Main international currencies
 USD, EUR, JPY
 Transaction function
 USD 84%, EUR 39%, JPY 19%
 Reference function
 USD- 69 państw, EUR- 40 państw
 Reserve currency
 USD 63,9% EUR 26,5%, GBP 4,7%
Source: BIS, IMF
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International liquidity
 A stock of assets enabling settling international
payments
 An appropriate level and quality of reserves
 Reserves- assets held by the monetary
authority, which may serve to reinstate the
external equilibrium
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International liquidity
 Reserves types
 Foreign currency
 Gold
 SDR (special drawing rights)
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Reserves structure (bln USD)
Source: IMF
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Global payment equilibrium
 Tools enabling balance of payments
adjustments
 Automatic mechanisms
 Adjustment policy
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Global payment equilibrium
 BP surplus
 China 296 bln USD, Germany 131 bln USD, Japan
110 bln USD
 BP deficit
 USA, -380 bln USD, Spain -70 bln USD
Source: IMF
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Framework for the national
economic policy
 External and internal equlibrium
 IMF
 Measures to reinstate the BP equilibrium
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Stabilisation of the international
economy
 ER volatility
 Various ER regimes
 The role of reserves
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Currency convertibility
 The legaly established possibility to
convert freely the national currency for any
foreign currency and vice versa at a single
ER
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Currency convertibility
 Internal convertibility
 External convertibility
 Unlimited convertibility
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The gold standard
 1870-1914
 Creation of the world economy the
necessity to create an IMS
 The main goal- maintaining the external
equilibrium
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The gold standard
Main rules:
 Fixed ER at the level of the mutual gold parity of
two currencies
 The amount of money in circulation strictly
depends on the stock of gold reserves
 BP imbalances adjusted through gold flows
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The gold standard
The mechanism:
BP deficit
outflow of gold reserves
decrease of money supply
decrease of national prices 
increase of exports, decrease of imports
BP equilibrium reinstated
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The gold standard
 Fast BP adjustments +
 Low ER volatility +
 Scarce set of measures enabling the reinstatement
equilibrium  The internal equilibrium subordinated to the external
eqilbrium
-
 Deficit countries bear the burden of adjustments International finance
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The gold bullion standard
 1918-1939
 No convertibilty of money to gold
 Gold served the purpose of equilbrium
adjustments
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The gold bullion standard
 Great depression 30-ties
 Protectionism
 Economic desintegration
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The Bretton Woods system
 1944-1971
 Endavour to reconcile the external and
internal equilibrium
 IMF and World Bank
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The Bretton Woods system
Rules:
 Fixed ER versus USD
 Fixed price of gold in USD
 Official foreign reserves- gold and USD
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The Bretton Woods system
 IMF
 The possibility to adjust ER
 Member quotas
 Loans
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The Bretton Woods system
 Currency convertibility
 Liberalisation of capital flow
 Growing economic integration
 Speculative capital flows
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The Bretton Woods system
 The problem of the US external
equilibrium
 The necessity to hold large gold reserves
 The credibility problem
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The Bretton Woods system
 Fiscal expansion in the USA  inflation
terms of trade deterioration BP
deterioration
 Expansionary monetary policy of the FED
 Speculation on USD depreciation
 A two-level gold market
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The breakdown of the Bretton
Woods system
 1970- recession in the USA  the
necessity to devalue USD
 1971- suspension of USD convertibilty to
gold
 Revaluation of the other currencies
 The Smithonian agreement
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The breakdown of the Bretton
Woods system
 Intensive speculative attacks on USD
 The necessity to close the currency
market
 Floating ER
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The Bretton Woods system- an
assessment
 Stabilisation throughout 20 years
 International money supply ensured
 ER stability ensured
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The Bretton Woods system- an
assessment
 Insufficient international liquidity
 The internal equilibrium subordinated to
the external eqilbrium
 Changing economic environment
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After Bretton Woods
 Floating ER- Kingston 1976
 Expanded international liquidity
 The foundations of the contemporary IMS
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Summing up
 IMS functions
 IMS evolution
 The Bretton Woods system rules
 The reasons for the breakdown of the
Bretton Woods system
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References
 P. Krugman, M.Obstfeld, International economics: theory and policy.,
Pearson, Addison Wesley, Boston 2009
 E. Truman, The International Monetary System and Global
Imbalances, IMF conference paper 2010
 P. Clark, J. Polak, International liquidity and the role of SDR in the
International Monetary System, IMF Working Paper, 2002
 A. Kester, International reserves and foreign currency liquidity, IMF,
2001
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