International Finance For Dummies

Chapter 11

Macroeconomics of Monetary Systems and the Pre-Bretton Woods Era

In This Chapter

Understanding the relationship between types of money and exchange rate regimes

Examining the feasibility of independent macroeconomic policies under a metallic standard

Reviewing the metallic standard years prior to 1944

This chapter is the first of three chapters that focus on the international monetary system from a historical perspective. The term international monetary system refers to (implicit or explicit) arrangements that govern exchange rates between currencies. The first three chapters in Part IV (Chapters 11–13) tell the story of various exchange rate regimes that defined the international monetary system between the 19th and 20th centuries. The last section of this chapter starts with the golden days of the gold standard during the mid- and late-1800s and ends right before the start of World War II. Chapter 12 covers the Bretton Woods era (1944–1973). Finally, Chapter 13 examines the exchange rate regimes of the post–Bretton Woods era.

While it is informative to examine historical episodes of the international monetary system, one needs quite a bit of background information ...