Research Paper: Foreign Monetary System

Pages: 5 (1423 words)  ·  Bibliography Sources: 3  ·  Level: College Senior  ·  Topic: Economics  ·  Buy This Paper


[. . .] For this organization to perform efficiently, there are key performance characteristics that must take effect. The characteristics include the provision of adequate liquidity; this means that the provision takes the form of government official reserves held by other countries. In addition, it also needs incentives from commercial banks operating as foreign exchange dealers. Another characteristic is the requirement of individual countries to carry out economic and financial policies that help to maintain a well-balanced monetary system. Another characteristic is the need of confidence with the system. This means that if the private sectors will believe in the government process in creating policies that enhance a balanced international payment system, they will have confidence in the system. In addition, the IMF seeks to promote such policies on behalf of governments, and governments should undertake cooperative arrangements with one another to enhance the building of confidence in the system (Eichengreen, 2008).

Another organization resulted from the monetary system is the World Bank along with the IMF. It was created in 1944, in the Breton Woods conference. The United States and the United Kingdom were the most powerful countries during the conference. The World Bank mainly aims at reducing poverty in the world. This bank provides loans to developing countries to help them reach a developed state, and even offering technical advice, and project financing. The World Bank comprises of two organizations including the International Bank for reconstruction and development, and the International Development Association (Eichengreen, 2008).

Another organization is the World Trade Organization, which has its headquarters in Geneva. It was founded in 1995. This organization formed because of Uruguay round of multilateral trade negotiation that ended in 1993. WTO governs international trade, setting of international standards and the rules of trade. Currently, this organization has 150 members. The Bank for Internal Settlements is another organization that resulted from the monetary system, it established in 1930, and is one of the oldest international financial organizations, which established at the end of the First World War to aid the war compensation of the Germans.

However, the American monetary systems have tried as much compared to other countries to maintain a greater level of employment. The economy has not experienced low savings hence achieving large running deficits. The Central banks and the government must act in a generalized manner to achieve the stability of the banking systems. A major setback was the use of the dollar as an international problem. This led to gradual accumulation of the dollars by the fore figures. The use of the U.S. dollar in the International also brought about the dilemma faced by the reserve currency centre in seeking to approximate the external payment (Anonymous, 2011).

Although the use of the dollar was a challenge, it helped the U.S. government in saving the problem of gold scarcity, which would have led the economy to recession. The parity values were also a major setback. Most of the international currencies took the form of gold. Although parity values led to high rates of employment, the use of gold made it almost impossible in trying to determine the rate of exchange within the countries. Liquidity was also a challenge since the U.S. monetary systems depended on the International Monetary System (Anonymous, 2011).

The U.S. monetary system borrowed from the international systems in order to finance the short-term balance of pay-off deficits. This would lead to the International Monetary system (IMS), increasing the quotas to raise the amount of potential liquidity available to members. This was not predictable until the international systems acquired the ability to all the members, and the ability to supplement the long run growth of reserve assets permanently to all the members. The greater economic interdependence was also a major setback. The use of the dollar as an international currency and use of international monetary system led to the interdependence of countries resulting to clashes between domestic and international economic policies. These reformed after the stabilization of policies providing a stable manner in achieving domestic and balance of payment.


Ronald, M. & Wright, R.E. (2006). Development of the U.S. Monetary Union. Journal of Financial History Review, 13(1), 19-41.

Anonymous, (2011). Challenges and risks of the International Monetary System. Journal of Economic Review, 22(5), 768.

Eichengreen, B.J. (2008). Globalizing capital:… [END OF PREVIEW]

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APA Format

Foreign Monetary System.  (2013, May 17).  Retrieved June 16, 2019, from

MLA Format

"Foreign Monetary System."  17 May 2013.  Web.  16 June 2019. <>.

Chicago Format

"Foreign Monetary System."  May 17, 2013.  Accessed June 16, 2019.